The National Highways Authority of India (NHAI) has set a target to raise Rs 1 lakh crore via monetisation of its operational highway stretches over the next five years (till 2024-25) under the toll-operate-transfer (TOT) model, in a bid to find more non-budgetary, non-debt receipts for development of highways.
Under the TOT model, publicly-funded operational highway projects are given on long-term lease basis to domestic and foreign “patient capital” investors. Successful bidders are required to pay the lease amount upfront and recoup investments along with returns by collecting tolls over the lease tenure, usually between 15 and 30 years.
For the first time, in October 2017, NHAI had invited bids for monetisation of such public-funded highway projects through ToT. Since then, it has raised a little more than Rs 14,000 crore under two successful rounds. One TOT round had to be annulled for want of bidders. Bidding for the fourth bundle is currently under way.
The Cabinet Committee on Economic Affairs had in 2016 allowed NHAI to monetise 75 highway projects through the TOT model. On November 20, 2019, the Cabinet gave NHAI virtually an unfettered authority to make suitable changes, wherever required, in its asset monetisation programme through the TOT model.
Earlier operational projects collecting tolls for at least two years were allowed to be given on lease against upfront payment. This has since been relaxed. Now, a highway project collecting tolls for one year can be put up for auction.Also, flexibility has been granted to fix the lease tenure anywhere between 15 years and 30 years from the fixed 30 years earlier.
In the first tranche, nine highway projects were offered and Australia-based Macquarie bagged them quoting rS 9,681.5 crore for the total length of 680.5 km against the floor price of Rs 6,258 crore. NHAI’s second TOT attempt, however, failed. Against its set floor price of Rs 5,632 crore from eight highway projects with a total length of 586.55 km, the highest bidder (Cube Highways) quoted only Rs 4,612 crore, forcing the authority to abandon the plan.
In the third round, the Singapore-based Cube Highways won the bid, offering to pay Rs 5,011 crore upfront to take on long-term lease nine stretches, 566.27 km, on offer against the floor price of Rs 4,995.48 crore.
In the fourth tranche, 401.5-km is on offer and the authority has kept the reserve price at Rs 4,170 crore. Interested parties can submit bids by February 13. The NHAI needs additional funds as it is increasingly awarding projects though the Engineering, Procurement and Construction (EPC) route, where it is to bear all the expenses, as it failed to award projects through the traditional Build-Operate-Transfer (BOT) and less-taxing Hybrid Annuity Model (HAM) so far in the current fiscal.
Analysts estimate NHAI’s borrowings to go up to Rs 3.31 lakh crore by FY23, if NHAI is to fund the construction of around 35,000-km highway projects, including the first phase of 24,800-km Bharatmala programme and the balance road works under the NHDP, in six years starting 2017-18.
