NHAI awards first BOT project in a year, paves way for more

December 24, 2013

Timsy Jaipuria | New Delhi



After a gap of over a year, the government is set to award a highway project in the build, operate and transfer (BOT) category in what marks its effort to revive the public-private partnership (PPP) model in the sector. According to sources, the first PPP project of this fiscal in highways will soon be awarded to Mumbai-based IRB Infrastructure Developers for widening a 98.72-km stretch between Solapur and Yedeshi in Maharashtra to four lanes.However, the project, estimated to cost R972 crore, would be supported by viability gap funding (VGF) of 19% by the National Highways Authority of India (NHAI). Many stranded PPP projects in the sector were awarded on promises of high premium payments to the authority. “Given the poor response to the BOT projects these days, IRB’s proposal appeared to be better than what the NHAI had expected,” said a senior government official, asking not to be named.

Inability to meet toll revenue targets had forced investors like GMR, GVK and Ashoka Buildcon to quit their PPP projects in the highways sector and caused delays in other projects. Termination of projects awarded on the promise of high premiums to NHAI by the most prominent investors has resulted in renegotiation of premiums worth R98,000 crore payable over 20-30 years. Policymakers have since shifted focus to the conventional engineering, procurement and construction (EPC) projects, and not one new PPP project has been awarded in the sector this fiscal.

The details of the premium recast will be as per the Rangarajan panel’s recommendations, which is expected soon.

The number of new PPP projects awarded in the sector peaked in 2011-12 at 6,491 km and has since come down to 1,116 km in 2012-13.

In September this year, the Cabinet Committee on Economic Affairs had given its approval for widening the Solapur-Yedshi section of National Highway 211 in Maharashtra under the National Highways Development Project (NHDP) Phase IV on a design, build, finance, operate and transfer pattern.

While no new PPP project has been awarded this fiscal, one project was re-awarded — six-laning of the 122.88-km Barwa-Adda-Panagarh section of NH2 to IL&FS Transportation Networks in May.

Both the road ministry and NHAI have attributed the sluggish investor interest in PPP projects to not only the economic slowdown and resultant difficulty in meeting toll collection targets but also several loopholes in the model concession agreement. Developers had been vocal about financial stress, non-availability of land and uncertainty over securing environmental clearances as among various reasons behind not showing interest in bidding. Similarly, the government had also decided not to launch any bid without having all statutory clearances in place. This, according to senior officials, was the reason behind the poor awarding scenario in the current fiscal.

After the Solapur-Yedshi stretch, the government is likely to bring out another bid for a four laning project in Rajasthan, which is at a nascent stage. If this project also takes off, it will be the second project awarded on PPP mode in the current fiscal.

NHAI has a modest target to award 125 km on BOT mode this fiscal, while the target for EPC projects is set at 1,875 km. The ministry has revised its target for total awards by all agencies from 9,000 km last year to 5,600 km this year, including the 2,000 km to be awarded by NHAI.

IRB undertakes development of various infrastructure projects in the road sector through several special purpose vehicles. The company, along with its subsidiaries, has constructed, operated and maintained around 8,000 lane km of road length so far. The aggregate size of all its BOT projects (completed and under execution) is around Rs. 17,055 crore.



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