The National Highways Authority of India (NHAI) is setting its sights on enhancing the proportion of the toll-based highway construction model to 10%. The driving force behind this initiative is the introduction of viable projects and amendments to concession agreements. This article delves into the intricacies of the Build-Operate-Transfer (Toll) model, one of the various Public-Private Partnership (PPP) investment models. This topic holds significance for the IAS exam GS paper III.
Build-Operate-Transfer Model: Understanding PPP Models for UPSC
An Exploration of Different PPP Investment Models
| Model | Funding and Construction | Risk | Toll Collection |
| BOT (Toll) | The private sector is responsible for building and operating the highway, with funding sourced from bank loans and equity. | The private sector shoulders the risk associated with construction, traffic, and revenue. | The concessionaire is in charge of collecting tolls and revenue, which goes towards cost recovery over the concession period. |
| HAM (Hybrid Annuity Model) | The NHAI contributes 40% of the project cost to the developer, with the remaining amount paid in instalments over the concession period. | The NHAI takes on the construction risk, while the developer handles the traffic and revenue risk. | The NHAI collects tolls and revenue, which is used to repay the annuity to the developer. |
| EPC (Engineering, Procurement and Construction) | The NHAI takes on the full cost of building the highway. | The NHAI also manages the construction risk. | The NHAI collects tolls and revenue, which is used for cost recovery over the concession period. |
Delving Deeper into the Build-Operate-Transfer (Toll) Model
- Between 2007 and 2014, the BOT model was the go-to approach for highway construction in India.
- However, the model was hit by several disputes and delays, causing a significant slowdown in highway construction.
- In the years 2018-19 and 2019-20, no road concessions were awarded under the BOT model.
- The government then shifted gears towards other models such as HAM and EPC for highway construction.
- In recent times, the government has shouldered almost the entire cost of highway construction through the HAM and EPC models.
Proposed Changes in the Build-Operate-Transfer (toll) Model:
- The NHAI is focusing on raising the share of BOT (toll) in highway construction to 10% of the total awards.
- Only projects that are feasible on their own or with viability gap funding will be put up for bidding.
- The NHAI will ensure 90% of the construction zone (land for executing) for BOT projects.
- Concession holders have been granted the flexibility to change ownership after a year, as opposed to the earlier rule of two years.
- Innovative measures such as dispute resolution boards and sharing of traffic risk have been introduced to make BOT (toll) more appealing.
- The requirement for capacity augmentation by the concessionaire has been done away with, reducing the likelihood of contract disputes.
- The NHAI is considering changes in the model concession agreement and requests for proposal documents to redraft some provisions for eliminating areas of dispute.
- The ultimate goal is to make the BOT (toll) model more enticing to investors.
Conclusion: The NHAI is striving to boost private investment in highway construction through the BOT (toll) model. The suggested changes in the model concession agreement and request for proposal documents are aimed at making it more appealing to investors. This initiative aligns with India's objective of promoting self-reliance through the Atmanirbhar Bharat campaign and reducing the government's financial burden on highway construction.
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