The consortium of 11 Malaysian companies had identified the Agra-Kanpur stretch on the national highway number 2, Tada-Ichapuram stretch on the national highway number 5, Vadodara-Manor stretch on the national highway number 8 and Hyderabad-Vijayawada stretch on the national highway number 9 for development under build-operate-transfer scheme.

While the projects on national highway number 5 and 9 were identified for four-laning, those on national highway number 2 and 8 had an option for expressway.

After a presentation by the consortium, the ministry pointed out that BOT projects were either entitled to 40 per cent capital subsidy or 30 per cent equity participation by the National Highways Authority of India (NHAI) through a special purpose vehicle (SPV) floated for a particular project.

The ministry, however agreed to highercapital subsidy or higher equity participation by NHAI on the condition that the identified projects are taken up for expressways. Following this, the ministry sought a fresh presentation from the consortium on what kind of internal rate of return it would look for and what would be the toll rates for the project.

A preliminary study report in respect of these four projects was earlier submitted by the consortium registered under the name of CIDB Inventures Sdn Bhd to the ministry.

In their report, the Malaysians wanted 25 per cent internal rate of return in the four projects. However, the ministry did not accept the demand on the ground that such a high rate of return would mean high toll rates.

Under the government of India policy guidelines, toll rates (per kilometre basis) on completed four-lane national highways cannot be more than Rs 0.40 for car/jeep/van, Rs 0.70 for light commercial vehicles, Rs 1.40 for truck/bus and Rs 3 for heavy construction equipment. However, rates can be higher forexpressways. Among other criteria, selection of the bidder is also done on the basis of lease cost to consumers or lease capital subsidy required from NHAI.

The Malaysian side, however, insisted that the minimum rate of return should be 20 per cent. The Malaysians have also demanded a guarantee that no parallel facility would be constructed during the concession period.

The projects were identified after a memorandum of understanding (MoU) was signed by the Malaysian government, on behalf of the consortium, and the ministry of surface transport. The MoU was signed around two years back.

The MoU route facilitates assignment of projects on a government-to-government basis and not through the long-drawn bidding procedure.

Thailand recently envisaged interest in developing highways in the country through a similar route. A 12-member trade delegation, led by Thailand's deputy commerce minister Pravich Rattanapian, had visited the country in February. Thailand was requested to consider investing indevelopment of roads in the country through government-government basis or through the private sector. Another option was joint ventures between Thai and Indian companies.