The National Highways Authority of India (NHAI) plans to increase the share of the toll-based highway construction model to 10% by offering only viable projects and making changes to concession agreements. In this context, it is important to understand the various PPP investment models and this article talks about the Build-Operate-Transfer (Toll) model. This topic is relevant for the IAS exam GS paper III.
Different PPP Investment Models
| Model | Funding and Construction | Risk | Toll Collection |
| BOT (Toll) | The private sector builds and operates the highway with funding from bank loans and equity. | The private sector bears the construction, traffic, and revenue risks. | The concessionaire collects tolls and revenue and recovers the costs over the concession period. |
| HAM (Hybrid Annuity Model) | NHAI pays 40% of the project cost to the developer, and the rest is paid in instalments over the concession period. | NHAI bears the construction risk, and the developer bears the traffic and revenue risk. | NHAI collects tolls and revenue and repays the annuity to the developer. |
| EPC (Engineering, Procurement and Construction) | NHAI bears the entire cost of building the highway. | NHAI bears the construction risk. | NHAI collects tolls and revenue and recovers the costs over the concession period. |
Build-Operate-Transfer (Toll) Model
- Between 2007 and 2014, BOT was the primary model used for building highways in India.
- The model ran into disputes and delays, which slowed down the pace of highway construction considerably.
- In 2018-19 and 2019-20, no road concessions were awarded on the BOT model.
- The government shifted to other models, such as HAM and EPC, for highway construction.
- In recent years, the government has borne almost the entire cost of highway construction through HAM and EPC.
Changes proposed in Build-Operate-Transfer (toll) Model:
- The NHAI is working on increasing the share of BOT (toll) in highway construction to 10% of the total awards.
- Only projects that are viable on their own or with viability gap funding will be offered for bidding.
- The NHAI will commit 90% of the construction zone (land for executing) for BOT projects.
- Concession holders have been given the flexibility to change ownership after one year instead of two years as was the rule earlier.
- Innovations like dispute resolution boards and sharing of traffic risk have been provided to make BOT (toll) more attractive.
- The requirement of capacity augmentation by the concessionaire has been removed, reducing the chances of disputes in the contracts.
- The NHAI is examining changes in the model concession agreement and requests for proposal documents to redraft some provisions for removing areas of dispute.
- The aim is to make the BOT (toll) model more attractive to investors.
Conclusion: The NHAI is working to increase private investment in highway construction through the BOT (toll) model. The proposed changes in the model concession agreement and request for proposal documents aim to make it more attractive to investors. This move aligns with India’s goal of becoming self-reliant through the Atmanirbhar Bharat campaign and reducing the government’s financial burden on highway construction.
Build-Operate-Transfer Model [UPSC Notes]:- Download PDF Here
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