In a significant move to revitalize infrastructure development, Maharashtra, Uttar Pradesh, and Andhra Pradesh are set to lead highway projects in India under the Build-Operate-Transfer (BoT) model. This initiative comes after the Ministry of Road Transport and Highways made substantial efforts to reinvigorate toll projects following a hiatus since 2014.
With 53 proposed projects spanning approximately 5,200 kilometers and a total worth of ₹2.1 trillion, the government aims to attract private sector participation in undertaking construction risks for promising returns. Maharashtra is poised to account for 14 of these projects, covering 522 kilometers of highways, with an investment of ₹39,477 crore. Uttar Pradesh will undertake six BoT projects, spanning 1,344 kilometers and valued at ₹50,333 crore. Andhra Pradesh, on the other hand, will oversee seven projects under the BoT model.
This move signals a departure from the previous trend where the BoT model was the preferred choice, representing 96% of all projects awarded in 2011-12. However, its popularity steadily declined over the years as investor appetite for undertaking risks waned. Consequently, the government transitioned to the hybrid annuity model (HAM) to revive investments in road infrastructure projects.
Kushal Kumar Singh, a Partner at Deloitte India, highlighted that while the HAM model has been successful, it may not cater to certain investors seeking upside in highway projects and willing to take traffic risks. The proposed changes in the BoT model have received positive feedback from the market, indicating potential demand for such projects. Singh emphasized the importance of the government’s flexibility in adapting the model to evolving market dynamics for its success.
Under the BoT contract, large infrastructure projects are developed through public-private partnerships. In this arrangement, a private firm receives an initial concession from a public entity to build and operate the project. After a specified period, control of the project reverts to the public entity. The investor typically enjoys a concession period of 20 years or more, during which tolls are collected to recoup construction and operating costs and generate profits.
The National Highways Authority of India (NHAI) last attempted to allocate BoT road projects in 2020 in Maharashtra, Uttar Pradesh, and Andhra Pradesh. These projects were eventually awarded in March 2021 at a premium, with developers paying the government in addition to constructing the road. However, there were several challenges, including multiple extensions to bidding deadlines and the inclusion of incentives. Since then, projects have predominantly been awarded under the Engineering Procurement Construction (EPC) and HAM models due to implementation challenges with BoT projects.
To revive BoT projects, several initiatives have been undertaken, including schemes such as harmonious substitution, one-time fund infusion, rationalized compensation, premium deferment, and refinancing. These efforts aim to create a conducive environment for private sector participation and attract investments in infrastructure development.
The government’s ‘Vision 2047’ Plan outlines ambitious goals for the development of high-speed corridors and a world-class highway network in India. A robust public-private partnership in the roads sector will be pivotal in realizing this vision. By leveraging the BoT model and encouraging private sector involvement, India can accelerate infrastructure development and strengthen its transportation network to support economic growth and development.
