Will no longer continue with toll operate transfer model: Gadkari

Centre to halt toll-operate-transfer model in favour of InvITs to boost domestic participation in road monetisation and enable salaried class to invest, says Gadkari

The central government has decided to not continue with the highly popular monetisation model of toll-operate-transfer (TOT), said Union Minister of Road Transport and Highways Nitin Gadkari. 

The TOT model allows players to invest in bundles of already operational roads for a concession value paid upfront — the concessionaires then operate, maintain, and benefit from the toll revenue on the highways for a period of 20-30 years. 

“We will no longer continue with TOTs. The bundle size is much bigger in TOTs, where domestic players cannot even compete — we will go with InvITs (Infrastructure Investment Trusts) as a priority. There is a monetisation target which includes TOTs but I have talked to NITI Aayog, and explained that I will meet the investment target as far as the government is concerned.  However, this will be done through InvITs, not TOTs,” he told Business Standard in an interview. The pivot away, according to Gadkari, is being done as the ministry focuses on giving out more projects through its InvIT. 

Gadkari has been publicly critical of investors in TOT since as early as 2023. In February, the ministry paused all monetisation under the toll rights model after Gadkari and highways secretary V Umashankar wrote to the National Highways Authority of India (NHAI), asking for a comprehensive review of all TOT bundles awarded to date.

 

The TOT model is more favourable for the concessionaire than it is for NHAI, Gadkari had said in 2023 at a conference of Highway Operators Association of India (HOAI). 

“On top of (excessive returns), TOT bundles are being mostly purchased by foreign funds. I thought that people outside the country were buying the assets of the country and I am not comfortable with that. I want investors from our country and people from the service-class to benefit (from investment in highways),” the minister told this newspaper.   

The minister’s claim is at odds with the NHAI’s own declaration in its first-ever asset monetisation strategy document on June 9, where it disclosed its plans to offer three TOT bundles per quarter — one smaller (around ₹2,000 crore), one medium (around ₹5,000 crore), and one large (around ₹9,000 crore). 

Gadkari said the ministry is now working to bring public investment into InvITs. In its asset monetisation document, the NHAI for the first time publicly claimed that it intends to set up a public InvIT. 

“We want investors from our country to invest in InvITs, and I have signed some files for projects worth around ₹1,500 crore.  The InvIT will have investors both from India and abroad. We also want salaried people to invest in InvITs, where they make an 8.05 per cent return from the investment, and also in units, so that they can benefit from the appreciation in the value of the units of the InvIT,” Gadkari said. 

TOT has been the most preferred monetisation model for the highways ministry, which has been one of the better performing departments in the government’s ongoing asset monetisation drive. The ministry met 71 per cent of NITI Aayog’s target of ₹1.6 trillion monetisation between 2021-22 (FY22) and FY25. 

So far, the NHAI has monetised nearly ₹50,000 crore worth of highways under this model, and contributed to nearly 38 per cent of the ministry’s contribution to the first asset monetisation pipeline. 

This newspaper had previously reported that the second asset monetisation pipeline, which has not been released yet, will see national highways contribute nearly 25 per cent of the ₹10 trillion target by FY30. Industry players and officials expect TOTs to play a significant role in this endeavour.