The Central government is planning to issue a set of guidelines for allocating road projects on build, operate, transfer (BOT) basis. This will help in ensuring a certain level of preparedness before awarding projects as it looks to revive private investment in the sector.
Apart from making changes in the concession agreement and exit clauses, among others, the Ministry of Road Transport and Highways (MoRTH) will firm up the guidelines to ensure risks are largely eliminated to revive the mode of project construction. This approach fits into the category of ‘plug n play’ model where the government creates a special purpose vehicle (SPV) to secure environment, land clearances and removes utilities. It then bids out the SPV with all these in place, getting a much higher price for the bid.
The National Highways Authority of India (NHAI) has already recommended changes in the BOT framework which are now being reviewed by MoRTH. In BOT projects, private sector developers build a road using their own funds, operate it and then transfer it to the government after a specified period.
NHAI was considering changes in the concession agreement to make BOT projects more investor-friendly. Some of the major challenges facing BOT projects are timely land acquisition and forecasting traffic density correctly.
NHAI has set a target of awarding 6,000 km of road construction projects in the FY19, and around 10 percent of these projects are expected to be awarded under the BOT mode. The official said that banks and overseas pension funds will be looking to fund BOT projects if construction guidelines are tightened.