Highway monetisation: Fresh terms for highway TOT contracts soon

The monetisation of road assets through toll rights — which was put on hold over two months ago — would start soon as the Centre has nearly concluded deliberations on whether to continue with the toll-operate-transfer (TOT) mode in its current form.

 

Under TOT, operational national highways by the National Highways Authority of India (NHAI) are awarded to private players, who collect toll, operate and maintain the roads, and benefit from the surplus toll revenues.

 

The model, alongside Invits, has allowed several Indian and international investment funds to enter the infrastructure space by generating returns on operational roads.

 

In February, Union Road Transport Minister Nitin Gadkari and the ministry’s secretary V Umashankar had written to NHAI, asking for a comprehensive review of all assets awarded under TOT by the ministry, ordering a pause on all TOT bundles until a comparative analysis between Invits and TOTs was complete. “The ministry had communicated its concerns to NHAI. The comparative analysis has been completed and multiple rounds of discussions have been undertaken. The ministry is very close to finalising a policy on whether to continue with this route,” a senior government official said.

 

Gadkari has been vocal about his concerns with the monetisation model, claiming that concessionaires make exorbitant returns on the model, giving the government the shorter end of the stick.

 

“In the TOT model, the investors who took on projects promised us that they would bring their own investment, but our experience shows that they came here and took debt from Indian banks. I am also aware of the internal rate of return of some of these projects,” Gadkari had said in December 2023, while addressing a conference of

 

the Highway Operators Association (India). “The TOT model is more favourable for the concessionaire than it is for the National Highways Authority of India, so we will be adopting the Invit model more frequently,” he had said.

 

TOT is among the largest monetisation models for the government — preferred by concessionaires as well. It contributes to 38 per cent of the ministry’s monetisation pipeline.

 

The abrupt pause had hit the ongoing monetisation of TOT Bundle 15, in which Adani Enterprises had reportedly emerged as the highest bidder.

 

An alternate model of five-year toll collection rights had also been mooted by the ministry in its letter.

 

“This can have bearing on the safety of roads as well. There’s a capital overlay needed every five years or so to revamp the highway, and it is seen that the more aggressive the bidding, the more problems with the expenditure on revamping the stretch, because margins of concessionaires are thinner. Having shorter cycles of concession would mean that the roads are safer as new concessionaires would take up the work more seriously,” said the official.

 

Industry sources said that a decision on this is keenly awaited as financial institutions prefer this route and need an understanding of how to plan their investments.

 

Government officials said that once a decision is officially made, the ministry would be banking on TOTs going forward and it has the largest asset monetisation target out of all ministries in the second asset monetisation pipeline — ₹3.5 trillion by 2030. Sources said that the path going forward would see preference for Invits, but TOTs would be present in the strategy.