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New Delhi: The Center plans to reward new highway projects under the build-operate-transfer (BOT) model if traffic data generated through the electronic toll collection system Fastag shows that private developers can earn at least 15% annual returns from toll collection, two people aware of the matter said.
Less profitable projects, such as highway contracts showing less than 15% annual returns, will be awarded under the hybrid annuity model (HAM) or the engineering, procurement construction (EPC) route, where the government bears full or partial construction risk and funding. In contrast, under the BOT model, the private builder develops the road, operates it, and recovers the cost through tolls.
The move is aimed at reducing investors’ risk in building greenfield highway segments, as the developer will be aware of the potential returns on investment when bidding. This is expected to allow the government to submit more projects for award under the BOT route, which puts the investment risk entirely on private concessionaires. The plan is to make this route attractive for most highway project awards and it is expected that the private sector will participate more aggressively for these projects.
“As per the plan, the Ministry of Road Transport and Highways (MoRTH) has asked its highway construction and awarding arm – the National Highways Authority of India (NHAI) – to re-evaluate the traffic data for all upcoming highway projects so that projections on returns can be calculated more accurately,” said the first of the two persons quoted earlier, both of whom spoke on condition of anonymity.
“This will be used to differentiate highway awards with stretches having 15% or more returns under the BOT route, while others (with less than 15% returns) will be awarded under the HAM or EPC mode,” the person said.
Queries emailed to MoRTH and NHAI spokespersons on Friday remained unanswered till press time.
earlier report
Mint had earlier reported about the government’s plan to introduce a new model concession agreement (MCA) by the end of September. The move comes in the backdrop of the share of BOT projects in highway contract awards declining from a high of 90% a decade ago to less than 10% now. Private investors have so far avoided taking on the full risk of building highways and have instead opted for projects that have been awarded under HAM and EPC models.
Along with ensuring minimum returns on investment for highway concessionaires, MoRTH is also taking other measures such as extending tolling rights of competing highways to the same concessionaire that is building a new greenfield stretch, Mint reported earlier. It has also instituted a transparent compensation mechanism in the BOT contracts, where any shortfall in projected revenue will be compensated by the government. A more structured dispute resolution mechanism with clarity on termination payments has also been put in place.
Experts say that developer interest is being seen in the BOT model.
Jaganarayan Padmanabhan, senior director and global consulting head, CRISIL Intelligence, said, “BOT remains an important model, and the revived interest from developers reflects this. Developers are demanding a balanced risk-sharing framework and timely dispute resolution to ensure sustainable project delivery.”
popular method
As of 2014, BOT (toll) was the most popular method of rewarding highways. Between 2007 and 2014, only the BOT model was used to construct highways.
This model accounted for 96% of all projects awarded in 2011–12. But this gradually declined as investors’ appetite for risk declined and many concessionaires faced liquidity problems to complete projects won by making overly-ambitious bids. In 2018-19 and 2019-20, no projects were awarded through the BOT route. The last time NHAI tried to award road projects on BoT was in 2020, but it was ultimately awarded in 2021. In FY24 and FY25, road developer NHAI could allocate only a few projects on BoT mode.
“This is a welcome move. This was practiced earlier also, and it is good to note that this process is being emphasized again. This will ensure that viable projects go under BOT and others go under the HAM or EPC route,” said Kuljeet Singh, partner and national infrastructure leader, EY India.
According to rating agency ICRA, between 2016 and 2025, the road ministry awarded projects of about 110,000 km, of which about 90,000 km (81.5%) were under the EPC route. This was followed by the HAM model, which contributed 19,943 km or 18.4% of the total awards, while the BOT model accounted for only 0.1% of the contracts awarded.
ICRA expects the share of EPC in awards to be 60-65% in FY2026, followed by Hybrid Annuity Model (HAM) at 25% and 10% through BOT (toll) mode.
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