FCC

Build-Operate-Transfer model receives interest from road developers

2019-08-26

Road developers have shown an interest in bidding for build-operate-transfer (BOT) tenders on the condition that the National Highway Authority of India (NHAI) floats these in accordance to high traffic expectation and viability.

As reported, early on, BOT projects came with a series of shortcomings that included lack of government participation in upholding its part of obligations as per the PPP model, a high premium on these projects and unwillingness of bankers to back BOT.

However, according to keen developers bankers are ready to support the projects if the ?termination clause? that is part of toll-operate-transfer is applied to BOT too. The clause is a pivotal safety net for bankers because the termination payment will be basis the future cash flow capability of the project and not the cost of the project that was decided at the time of bidding.

It is estimated that NHAI should continue to offer projects on hybrid annuity model (HAM) and EPC and roll out the BOT model factoring in corridors that are busy and have a greater scope of traffic.