As many as 32 companies, including GMR Infrastructure, Reliance Infrastructure and IL&FS Transportation Networks, have been shortlisted by the National Highways Authority of India (NHAI) to bid for maintenance and toll collection rights of select national highways, an effort to plug leakages in toll earnings of the government and ensure proper upkeep of roads.
NHAI has witnessed close to 25% leakage in toll earnings at more than 100 toll plazas that are operated by ex-servicemen and wants to hand over these booths to private firms. Involvement of private companies would also take the burden of maintaining these stretches off NHAI’s shoulders.
The firms would operate and maintain toll plazas for a maximum of nine years and would have to share the revenue from toll collections with NHAI, a government official said requesting anonymity. ?The financial bidding would occur based on how much revenue the firms are willing to share,? he said. The companies had pre-qualified for financial bidding for 21 projects initially.
As the projects are restricted to maintenance and tolling of national highways, capital cost would be minimal and companies are expecting a return of up to 20% from these contracts. ?A return on investment of 18-20% is ideal on these projects,? Reliance Infrastructure CEO (roads) Sudhir Hoshing said.
Fierce competition is expected even for contracts on maintenance and tolling as roads are one of the few lucrative infrastructure business currently, shown by high negative grants offered by private firms for build-operate-transfer (BOT) projects awarded this year. ?There is negligible initial cost and returns are high. There would be tough competition as local companies would also participate in bidding,? IRB Infrastructure Developers CMD Virendra D Mhaiskar said.
NHAI had carried out a pilot project in 2005-06, when it took 11 plazas from the control of ex-servicemen and awarded them to private contractors through competitive bidding for a year. Thereafter, the toll revenue generated on these stretches increased by up to 25%. Following this experience, it took a policy decision to engage private sector for collection of user fee on national highways.