Govt to notify revamped model concession agreement for BOT (Toll) projects in a month, says road secretary Umashankar, ETInfra

Time of India

5 days ago

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ETInfra
NEW DELHI: The Ministry of Road Transport and Highways will notify a revamped Model Concession Agreement ( MCA ) for Build-Operate-Transfer (BOT) toll road projects that seeks to moderate the traffic risk faced by private investors, a top official has said.The overhauled MCA will drop the concept of competing roads and introduce a so-called buy-out principle by linking all parameters to traffic, V. Umashankar , Secretary, Ministry of Road Transport and Highways, said while addressing the ET Infra Roads and Highways Summit held in Delhi on July 18.'We are doing away with the concept of competing roads and additional toll ways and relating everything to traffic, which means that the need for disputes that are likely to arise will not now arise because these factors have been built in a different way,' Umashankar stated, noting that defining a competing road in India is 'very difficult'.According to the road ministry, 'competing road' means a road connecting the two end points of a highway and serving as an alternative route.'I have come across a case where in an arbitration somebody made a claim that a Pradhan Mantri Gram Sadak Yojana road was also a competing road for a BOT concessionaire,' he said, describing how a 'loose definition' of competing facility prescribed in the MCA creates a dispute at a later stage.'That aspect we are tightening out and the single parameter would be traffic. If the traffic is not up to the threshold or it drops compared to previous years, then a mechanism automatically should kick in. Along with that, when a highway reaches the targeted traffic, then there will be a buyout principle. We can buy out so that we are not locked in and the expansion of the highway does not happen,' the Secretary disclosed.The changes are aimed at removing the 'uncertainty' and to make the MCA and the construction part 'more predictable' so that financing and construction becomes 'easier', thereby helping the highway authority to impose 'quality conditions' upon it.'We are rewriting the model concession agreement where we are moderating the traffic risk that is faced by a BOT concessionaire. There will be built-in mechanisms for extension or compensation in case traffic falls below the threshold and there will be a (revenue) sharing mechanism where the traffic goes beyond that threshold,' said Umshankar.'We are at the final stage of the MCA clearance and, hopefully, in a month's time we should be notifying it,' Umashankar said.The revamping of the MCA comes close on the heels of the government's decision to revert to the BOT (Toll) model for developing highways after a gap of close to a decade.Under a BOT Model, a private developer is responsible for financing, building and operating a highway project in which he is allowed to recover the investment by way of user charges or tolls for a specified period.The BOT (Toll) Model is one of the key instruments adopted by the government for development of large-scale highway projects, but over the years it had fallen out of favour as developers faced challenges such as delay in land acquisitions, environmental clearance and fluctuation in traffic impacting toll revenues, among others.In the revamped model concession agreement, it is expected that the government will enable provisions wherein changes to concession modalities will come about if the projected traffic undergoes variation by more than 5 per cent, than the earlier 20 per cent threshold, Minister of State for Road Transport and Highways Harsh Malhotra , had said in an interaction with ET Infra earlier.The revamped model concession agreement related to BOT (Toll) Model is also expected to include significant changes related to land acquisition norms, forest clearances and other aspects related to pre-construction activities.'There were issues with the BOT concept. So, the first part of ensuring that we have a good BOT system in place is if we take care of the pre-construction issues -- land acquisition, forest clearances and others. On this again, we have issued a schedule saying at what time the project will be bid, at what time the project will be received based upon pre-construction activities,' said Umshankar.'Today, we will not even initiate the bidding process unless a wildlife clearance is received because that has an impact on cost. We won't receive the bids unless forest clearances are received,' he added.Under the existing norms, developers were exposed to operational risk at various stages of construction and were mandated to commence the work on the project after minimum acquisition of 80 per cent of the land required for the project.'What we (now) do is that we spend a little time on the appraisal, approval process and then the construction time gets spread out. We are planning to do it the other way, spend a little more time doing the pre-construction part and then get into the award so that the construction proceeds ahead smoothly. So, if you do that then you take the project construction risk significantly out of the game,' said Umashankar.The government's endeavour to revive the BOT (Toll) Model has come at a time when budgetary allocation has reached a peak, with capital expenditure for 2025-26 at ₹11.11 lakh crore, a marginal increase from the previous year. The ministry and the National Highways Authority of India (NHAI) is now looking more at monetisation of brownfield highways and expressways rather than funding via debt and relying on budgetary support.Acknowledging that there has been a 'slight dip' in the highway award process, the Secretary said that 'it is also because this is the time to re-calibrate, re-consider and re-think because what we do now is going to stay with us for the next 50 years and that will be it'.The MCA for Hybrid Annuity Model (HAM) road projects will also be revised, Umashankar added.