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Build-Operate-Transfer (toll) model

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