Maharashtra, UP, AP lead BOT projects
Maharashtra, Uttar Pradesh, and Andhra Pradesh will spearhead highway projects under the build-operate-transfer (BOT) mode, following the road ministry’s significant efforts to revive toll projects after a hiatus since 2014.
Among 53 proposed projects, Maharashtra will account for 14, UP six, and Andhra Pradesh seven. The move comes amid growing interest from the private sector in undertaking construction for promising returns.
The government has earmarked 53 BOT, or toll projects, spanning 5,200 km, worth ₹2.1 trillion. Bids for seven projects, covering 387 km and valued at ₹27,000 crore, have already been invited, with over a dozen more scheduled for FY25.
The BOT model was the preferred choice, representing 96% of all projects awarded in 2011-12. However, its popularity steadily declined to zero as investor appetite to undertake risks waned. Subsequently, the Centre transitioned from BOT to the hybrid annuity model (HAM) to revive investments in road infrastructure projects.
“While HAM has been established as a successful model, it does not cater to certain sets of investors who are looking for upside in highway projects and are willing to take traffic risks provided there are certain safeguards incorporated in the concessions,” said Kushal Kumar Singh, partner, Deloitte India.
“With the recently proposed changes in the BOT model, there is positive feedback from the market and there will be demand for such projects. The key to success for such a plan would be the government’s willingness to adapt the model to the changing dynamics of the market,” he added.
Under a BOT contract, large infrastructure projects are developed through public-private partnerships. In this arrangement, a private firm receives an initial concession from a public entity to build and operate the project.
After a specified period, control of the project reverts to the public entity.
The investor typically enjoys a concession period of 20 years or more, depending on traffic projections.
During this time, tolls are collected to recoup construction and operating costs and to generate profits.
According to the plan, Maharashtra will undertake 14 projects, covering 522 km of highways, with an investment of ₹39,477 crore. Uttar Pradesh will execute six BOT projects, spanning 1,344 km, worth ₹50,333 crore.
The National Highway Authority of India last attempted to allocate BOT road projects in 2020. These projects were eventually awarded in March 2021 at a premium, with developers paying the government in addition to constructing the road, after several extensions to the bidding deadlines and inclusion of a few incentives.
Since then, projects have been predominantly awarded under the Engineering Procurement Construction (EPC) and HAM models due to the various implementation challenges associated with BOT projects.
Among 53 proposed projects, Maharashtra will account for 14, UP six, and AP will have seven