The National Highways Authority of India (NHAI) and other road-building agencies should look at reviving Build Operate Transfer (BOT) model by putting up projects costing less than Rs 1,000 crore for award through this route, Minister of Road Transport and Highways Nitin Gadkari said Monday.
The minister’s comments came amid a prolonged dearth of private investments in the sector caused much strain to the exchequer. For the first time, the minister also hinted at financing problems potentially impacting the pace of highway construction. “We do not have the financial capacity in the country. Looking at the financial health of the contractors, if we put out projects under Rs1000 crore for bidding under BoT, we will see greater competition. In bigger projects under BoT, only 4-5 bids will come which we will have to reject,” he said.
The minister was addressing the regional officials of NHAI, National Highways and Infrastructure Development Corporation and road division of his ministry.
For the past many years the government has been trying to revive BoT after this mode of highway development came to a grinding halt post 2014 as contractors faced delays and their debts piled up as projects could not be completed on time.
Under the BoT the cost of construction of a road project is borne by the concessionaire in return for the right to collect toll on it for 15 years. Land costs are, however, borne by the government.
During 2007 and 2014, only BOT was used for building highways. In 2018-19 and 2019-20, no road concessions were awarded on the BOT model.
In the last few years, almost the entire cost of highway construction has been borne by the government through hybrid annuity model (HAM) and engineering, procurement and construction (EPC) model. This has resulted in a big jump in budgetary support to NHAI.
The HAM model of highway development was announced in 2016 where NHAI pays 40% of the cost of highway construction upfront to the concessionaire and rest in installments. Under EPC the NHAI bears the full cost of making the highway.
Under Bharatmala so far EPC accounted for 46.9% and HAM 51.7% and BOT 1.4% awards.
Gadkari said in case of almost all the roads built through EPC the quality of construction has been bad because the contractor’s work ends with the completion of the projects. “In the BoT model the concessionaire has to maintain a project for 15 years after building it so the quality in BoT is better.”
The minister said as the health of the road sector has improved and banks are again willing to lend to the sector, the opportunity has emerged once again to revive BoT.
By enhancing public private partnership in the sector the projects that have to be executed in 10 years can be completed in three years, he said.
He said out of the Rs 10 trillion worth of road works that will be part of annual plans of the NHAI, NHDIL and road wing of the ministry in coming years, Rs 3.5-4 trillion can be done through BoT and Rs 2-3 trillion through HAM.
To start with the government has set an interim target of 10% share of BoT in road projects.
