Planning Commission reviews BOT model for road projects

The Planning Commission is reviewing the Build, Operate and Transfer (annuity) model of building roads to see why it is not finding acceptability in large sections of the government.

In the annuity model, the cost of building the road is paid to the developer every six months after the beginning of commercial operations of the project.

The other BOT model is that in which the developer is allowed to recover his investment by collecting toll over a concession period of 30 years in most cases.

“We are reviewing the whole BOT (annuity) model for road development to find out the reason behind its non-acceptance in the country, even when it is the most preferred model globally. Majority of roads in the US and Europe have been built on the annuity mode,” said a source, who did not want to be identified.

In most cases, the Public-Private Partnership Appraisal Committee (PPPAC) feels that the project should be taken on Engineering Procurement and Contract (EPC) basis than on annuity and “that is where the problem starts”.

The Planning Commission, too, opposes the annuity model, as the panel feels it is very expensive and the developer who builds the road does not have any accountability after the project is complete.

However, the National Highways Authority of India (NHAI) does not have any complaint against the existing BOT (annuity) model and has said it would go ahead with any scheme for building roads that is approved by the government.

“We are an implementing agency and have no problem in going ahead with any mode suggested by the government. We follow a waterfall model in which we try to bid the project first on toll, then on annuity and finally on EPC to award the project,” said a senior NHAI official on condition of anonymity.

Analysts feel building roads in India is quite different from other countries and the toll scheme is the best for building roads here.

“Highways in the US and Europe have much less traffic than India. And by building roads on toll basis, the sector not only gets private funds but also the expertise that private participation brings,” said Parvesh Minocha, managing director (Transportation Advisory & Engineering Division) of Feedback Ventures, an infrastructure consultancy firm.