27 investors evince interest in new bundle of TOT project offered by NHAI

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As many as 27 investors have shown interest in the new bundle of toll-operate-transfer (TOT) project that has been offered by the National Highways Authority of India (NHAI). The authority is targeting Rs 4,995 crore from monetisation of the third tranche of 566 km of highways under the TOT model. 

More such contracts are expected to follow as the authority expects greater appetite for such projects. The first bundle had fetched NHAI Rs 9,682 crore. The bids for the third bundle were invited on June 13 this year, and the last date for the submission of bids is September 11.

Nine highway stretches of 566.27 km in Uttar Pradesh, Bihar, Jharkhand, and Tamil Nadu are on offer in the third bundle.

The first bundle under the TOT model had nine stretches involving 681 km and was awarded to Macquarie.

“At the start of the TOT exercise, we had earmarked 5,000 km length of projects into 10 bundles. Depending on the response of each bundle, we will keep tendering more and hopefully by 2024 have a portfolio of 10 bundles,” NHAI Director (Finance) Asheesh Sharma said.

This third bundle is a part of the 5,000-km projects planned earlier, he said, adding that if there is further appetite in the market, the authority would offer more such monetisation contracts.

Though the first bundle received a good response, the second offering was a dampener as the bids were below the base price of Rs 5,362 crore, set by NHAI.

The third phase initially mandated capital works of about Rs 400 crore lower than bundle 1 and bundle 2, which will lead to significant savings for investors. Almost 43 per cent of bundle length is under annuity for 8-10 years, which will lead to savings on at least one major maintenance cycle.

NHAI Chairman Narendra Nath Sinha said the transport sector had been allocated an enhanced outlay of Rs 83,000 crore in the Union Budget for development of roads and highways. The remaining funding requirements to meet ambitious plans are being managed through private sector investments.

“Several more bundles will be offered in the months to come. He called upon private investors to bid for these bundles, saying TOT is a risk-free model,” Sinha said at the road show for the third phase of TOT project for prospective bidders.

The first tranche of nine projects — totalling about 680 km roads in Andhra Pradesh and Gujarat — was awarded in 2018. Huge interest was shown by foreign investors. TOT Bundle-I was awarded to Macquarie for Rs 9,681 crore, which was 1.5 times the estimate. 

The second bundle of over 586 km spread over four States — Rajasthan, Gujarat, West Bengal, and Bihar, with 12 toll plazas across four highways was also offered last year.

TOT model in India has been developed to encourage private participation in the highways sector.

The TOT model has the concessionaire paying a one-time concession fee upfront (lump sum), which then enables the concessionaire to operate and toll the project stretch for the pre-determined 30 year concession period.

On August 3, 2016, the Cabinet authorised the NHAI to monetise public-funded national highway projects that are operational and are generating toll revenues for at least two years. 

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