A forward-looking highway MCA

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: In the first part of this article (FE, Nov. 16) I argued that Least Present Value of Revenue (LPVR) structures were a simpler and improved method of linking concession period to traffic growth, compared to the new model concession agreement (MCA), with no added information requirements. This concluding part indicates some other critical issues.

Land acquisition: A contentious provision is that National Highway Authority of India (NHAI) should hand over “vacant access” for at least 80% of the land. This, some contend, will delay the award of projects, while others argue that with completion held up due to problems with land availability, it will ensure faster completion. Theoretically, it is undeniably prudent to acquire land before awarding projects, but this approach conflates problems of civil works contracts and public-private partnership (PPP) concessions.

In civil works contracts with built-in cost escalation, the contractor can benefit from delay. In contrast, the PPP concessionaire is interested in early completion and increasing his revenue by collecting toll earlier or receiving extra annuity payments. He, thus, extends all support to authorities in obtaining vacant access—manpower to address administrative problems, prompt procedural follow-up and, on occasion, negotiating with affected parties to redress grievances difficult to address within the unyielding boundaries of government procedure, e.g., constructing a new, better structure in lieu of the one to be relocated.

Courts also seem to dispose land acquisition cases more urgently once construction starts, maybe since the balancing benefits that offset relocation costs become more evident. Thus, unlike civil works contracts in PPP projects, the private partner actually helps to obtain vacant access to land. Indeed, barring odd exceptions like the Delhi-Gurgaon Expressway, PPP projects are not delayed. Instead of second-guessing the implementation agency, the extent of vacant access to be provided is perhaps best left to them.

Tolling: The new MCA’s toll collection provisions are overly detailed, assumes continued open barrier tolling, and thus keeps our system in the past, while barrier tolling is being phased out internationally. In many countries today, tolling is unrelated to crossing toll plazas. Instead, toll collection is through on-board vehicle devices where the road usage is monitored wirelessly in a virtually closed toll system. Electronic tolls can also be fine-tuned.