3.4.8. Highway Construction Policies

The following are the major policy interventions undertaken this year:

Recycling of operational highway assets using the Toll-Operate-Transfer (TOT) Model: The Model has been developed by MoRTH and approved by the CCEA in August, 2016. As per the Model, the right of collection of Toll Fees for operational public funded NH projects is to be assigned for a pre-determined concession period (30 years) to concessionaires against upfront payment of a lump-sum amount. O&M obligations of such projects shall be with the concessionaire till the completion of concession period. This Model facilitates long term O&M of constructed NH projects through private sector efficiency. This is a big investment opportunity for long term institutional investors - both domestic and international like pension funds, insurance funds, wealth funds etc. in addition to banks. Initially, 75 public funded NH projects with aggregate length of around 4,500 km and annual toll revenue collection of around Rs 2,700 crores have been identified for the Model. The Model Concession Agreement (MCA) has been developed and the first round of bidding for projects shall be taken up in near future.

Hybrid Annuity Model (HAM): As per the model, 40% the Project Cost is to be provided by the Government as 'Construction Support' to the private developer during the construction period and the balance 60% as annuity payments over the operations period along with interest on the outstanding amount. The payable interest rate is linked to market rates (Bank Rate + 3.00%). There is separate provision for O&M payments by the Government to the concessionaire. The private party does not have to bear the traffic and inflation risks. The Model has been successful in reviving PPPs in the sector, which is evident in the interest being shown by the market for such projects. Till now, 33 NH projects with an aggregate length of around 1,800 km and involving cost of around Rs. 29,450 crores have been already awarded under the Model. Many more are in matured stages of bidding.