The ambitious plan of NHAI offers avenues in the form of build-operate-transfer (BOT), engineering, procurement, and construction (EPC), hybrid-annuity (HAM) and toll-operate-transfer (TOT) or monetisation of road assets.
“We have projects for every kind of investor. Road projects are built on various modes – BOT, HAM, EPC and TOT – and provide an opportunity for small, medium and large investors,” an NHAI official said.
Currently, linear infrastructure companies participate in highway construction and their share in the overall road construction mix is 25 per cent. This is now expected to go up to 30 per cent. Experts feel that the reason behind this could be the financial situation of these companies.
“Maybe, the existing companies are in a situation where the banks would not lend them. It could also be that the linear infrastructure companies are hedging their risks by investing in the road sector as it is performing better than power and railways,” said Vijay Chhibber, former road secretary.
BOT projects are usually executed by large companies that have a higher risk appetite as the construction and operation risk is borne by that company. Hybrid-annuity model projects allow mid-sized companies to invest as 40 per cent of the equity is pumped in by the government.
EPC projects are fully funded by the government and the concessionaires are hired as execution agencies that hand over completed projects to the government. Road monetisation or TOT projects are essentially new projects constructed by the Centre and offered for operation and maintenance to international investors for a longer duration, usually 25-30 years.
The TOT model in India has been developed to encourage private funding of highways that have already been developed. Under it, the concessionaire pays a one-time concession fee upfront (lumpsum). This then enables the concessionaire to operate and toll the project stretch for the pre-determined 30-year concession period.
On August 3, 2016, the Union Cabinet authorised the NHAI to monetise public-funded national highway projects that are operational and generating toll revenues for at least two years after commercial operations through the TOT model.
About 75 operational highways completed under public funding were initially identified for potential monetisation.
The government has made allocation to the NHAI for major works under the Bharatmala Pariyojana, entrusted to the organisation for executing this.
The money will come from the Central Road Infrastructure Fund, Permanent Bridges Fee Fund, and Monetisation of National Highways Fund.