The Ministry of Road Transport and Highways (MoRTH) in India has recently announced a series of revisions to the model concession agreements (MCA) for build-operate-transfer (BOT) and tolling, operation, maintenance, and transfer (TOT) projects. These changes have been put in place to encourage private sector investment in road infrastructure and clarify existing agreements.
Boosting BOT Project Amendments
One of the key amendments to the MCA for BOT projects includes the provision of construction support to ensure timely completion. This is an important step to address any unforeseen circumstances that may arise during the construction phase. Additionally, the tolling period for projects has been extended to offset any potential losses due to competing roads. The updated MCA also outlines compensation frameworks for force majeure events and termination payments, ensuring that these aspects are clearly addressed. Furthermore, the amendments highlight the need for debt and equity provisions to align project costs with government projections, thus ensuring sustainability. The Ministry of Road Transport and Highways will also take steps to continuously assess escrow account statements to prevent any funding shortages and project delays. These measures aim to streamline the implementation of road projects and avoid any unnecessary hurdles. The ministry has assured stakeholders and implementing agencies that these amendments were made after meticulous consultations, ensuring that all the concerned parties’ voices were heard.
Introduction of Changes in TOT Agreements
The revisions in the TOT agreements include increased frequency of checks, now thrice, and a reduction in the threshold for variation in toll collection to 5%. These key adjustments will ensure that modifications to the concession period are made promptly, based on any notable variations in toll collection.
Expert Views and Future Prospects
The changes introduced in the MCAs have garnered positive views from experts in the industry. Akshay Purkayastha, the Director of Consulting at CRISIL Market Intelligence and Analytics, specifically praises the revisions, highlighting their positive impact on debt obligations, capacity enhancement, and clarity surrounding compensation agreements. While experts widely recognize the importance of these amendments, doubts still loom over their potential revival effect on BOT projects. The outcome coupled with the overall efficacy of the changes in stimulating private sector investment is yet to be fully assessed.
Auctioning of Projects by the National Highways Authority
As a part of the larger vision to strengthen road infrastructure in the country, the National Highway Authority of India, under MoRTH, has announced plans to auction 53 projects valued at over Rs 2,200 billion. These projects will cover an extensive 5200 kilometer network. Currently, engineering procurement construction (EPC) projects or hybrid annuity mode (HAM) projects are more commonly adopted, as implementation challenges face BOT projects. The introduction of key amendments and the upcoming auction present an optimistic outlook for private sector involvement in India’s road infrastructure development. The government’s constant efforts to spur investment and regulate agreements demonstrate a commitment to improving the country’s transportation network. As a result, these revisions are likely to invite much-needed investments and drive progress in meeting India’s road infrastructure targets.
