The Cabinet Committee on Economic Affairs on Wednesday allowed NHAI to vary the concession period under the Toll-Operate-Transfer (TOT) model to between 15 and 30 years, depending on the features of the projects.
According to the earlier model approved by the government in 2016, NHAI monetises publicly funded highways by offering investors toll collection rights for 30 years for a lump sum amount.
“With this flexibility, we now get a larger pool of road stretches to choose from,” a senior government official told ET.
Several smaller road stretches may not require capacity augmentation for 15 years and can be offered for shorter-duration concessions, the official said. For the 30-year contracts, the roads would need to be expanded and more maintenance.
The next TOT batch that NHAI offers will have smaller concession periods of about 15 years, the official said. Effectively, the initial estimated concession value, or the base price set by NHAI, will also come down to Rs 2,500 crore to Rs 3,000 crore.
“The package size of going to reduce by 20-30%,” the official said.
NHAI’s first round of TOT auctions had a base price of Rs 6,258 crore, while the second and third packages were in the range of Rs 5,000 crore.
Small toll packages will facilitate the entry of a wider range of investors. TOT 1 was bagged by Australia’s Macquarie Group and TOT 3 was recently bagged by Singapore-based Cube Highways – the companies quoted prices of Rs 9,681 crore and Rs 5,011 crore, respectively. The second round of TOT auctions was cancelled after bidders failed to match NHAI’s expectations.
Smaller TOT packages will allow Indian companies to come in and not be shut out by foreign investors with deep pockets, experts said.
“This is a sensible decision to make because raising long-term debt for 30 years is not always feasible for investors,” said Vinayak Chatterjee, chairman of Feedback Infra.
“This will make way for a wider participation in these TOT projects, allowing more Indian and not-so-large international firms to bid for such projects.”
The Cabinet also allowed NHAI to monetise roads one year from the date of operation instead of two years.
“One year gives a decent idea of the toll history, so it makes it convenient for us to recycle assets faster,” the official said.
NHAI has set a target of Rs 10,000 crore from monetising assets in FY20, banking on this mode to raise resources and meet its hefty construction costs.
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