NHAI to roll out new model agreement for annuity projects

The government plans to introduce a new model concession agreement (MCA) for annuity-based highway projects. The new agreement will be aligned to the one for toll projects and will have the approval of the Planning Commission that has framed the concession agreements for almost all the infrastructure sectors.

The annuity projects are currently being awarded by MCA, formed by the National Highways Authority of India (NHAI) in 2000.

Annuity and toll are two forms of Build-Operate-Transfer (BOT) projects, based on which NHAI executes highway projects. In the annuity model, a road developer is awarded the projects and the cost of building the road is paid to him on a six-month basis after the projects starts commercial operations. This derisks the business of the operator to a large extent. “The new MCA has been prepared by the Planning Commission and is a move forward in having a common MCA for all the BOT projects. This MCA will not have features not needed for annuity projects,” said a senior NHAI official, who did not want to be identified.

Clauses like traffic determination, projection and grant or viability gap funding to make the project viable would not be there in MCA, as that was not needed for annuity projects, added the official.

In the toll model, a road developer builds the road and is allowed to recover his investment by collecting toll over a concession period of 30 years in most of the cases.

Industry, however, feels there are no problems with the current MCA for annuity. “We do not have any issues with the current MCA,” said M Murali, director general, National Highways Builders Federation.

The NHAI official said the earlier plan was to make a hybrid MCA, which was to have components from both the agreements but the Planning commission did not approve it. Earlier, the projects were awarded on the basis of bidding documents prepared by NHAI and it was only in 2005 when the Planning Commission formed an MCA for BOT projects. Since then, the document has been subject to lot of review and the B K Chaturvedi Committee report gave powers to the NHAI board to revise it according to the needs.

B K Chaturvedi is a Planning Commission member, under whom a committee was formed by the prime minister to find ways to expedite road projects.