Facts for Prelims (FFP)
Source: FE
Context: The National Highways Authority of India (NHAI) is working on increasing the share of the Build-Operate-Transfer (toll) model in highway construction to 10% of the total awards
Status of the model used:
As per the ICRA report: EPC will remain the mainstay of awarding contracts, accounting for 70-75% of total projects offered while BOT will be less than 5%.
Aim of NHAI: Building 60% of highways through HAM, 30% through EPC, and 10% through BOT (toll).
Changes proposed in BOT:
- NHAI will offer only viable projects with land already tied up for bidding, which can be completed on their own or with viability gap funding.
- NHAI will commit 90% of the construction zone (land for execution) for such projects
- Flexibility has been given to concession holders, allowing them to change ownership after a 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.
Comparison of three models:
| Engineering, Procurement, and Construction Model | Build-Operate-Transfer Model | Hybrid Annuity Model |
| The government pays private players to lay roads. The private player has no role in the road’s ownership, toll collection or maintenance (it is taken care of by the government) | Private players build, operate and maintain the road for a specified number of years before transferring the asset back to the government. | A mix of EPC and BOT: NHAI releases 40 per cent of the total project cost. The balance of 60 per cent is arranged by the developer |
| Risk: Borne by NHAI | Borne by concessionaire | Shared between NHAI and concessionaire |
| Cost sharing: NHAI bears the full cost | The concessionaire bears construction and O&M costs | NHAI and concessionaire share construction and O&M costs |
| Ownership: NHAI owns the project from beginning | Concessionaire owns the project for the concession period, then transfers to NHAI | Concessionaire owns the project for 15 years, then transfers to NHAI |
