NHAI invites investors for second bundle of Toll-Operate-Transfer Project
The National Highways Authority of India (NHAI) is inviting investors to bid for the second bundle of its Toll-Operate-Transfer (TOT) project.
A Road Show on the second bundle of Toll-Operate-Transfer (TOT) was held in Mumbai on the 15th of this month, to invite prospective investors to be a part of the TOT projects. National Highways Authority of India (NHAI) has already done these Road Shows in New Delhi, New York and Toronto in August and September this year.
TOT is a model for monetising operational National Highways projects. The investor makes a lump sum payment in return for long term toll collection rights backed by a sound tolling system. The concession period is 30 years. Upto 49 % divestment is allowed till two years of the concession period. Upto 10 % change in ownership is allowed after two years. The investor is de-risked from undertaking any construction. If required, NHAI will conduct capacity augmentation at its own cost.
However several concerns exist about the model itself and the structure of the entities investing in the project. Here are some links to detailed articles on the same.
- How Macquarie Makes Money By Losing Money on Toll Roads
- Macquarie Bank’s controversial infrastructure funds — A Lengthy exposé by Bethany McLean in Fortune
- How Public-Private-Partnerships extract private profit from public infrastructure projects
The first TOT bundle of 9 projects, totalling approximately 681 KM of roads in two states of Andhra Pradesh and Gujarat, was awarded in 2018. Huge interest was shown by foreign investors. TOT Bundle-I was awarded to Macquarie for Rs. 9,681 Crore, which was 1.5 times the Authority’s estimate. National Highways Authority of India did a financial closure of this project, with the India chief of Macquarie handing over a cheque for Rs 9,681.5 crore to Nitin Gadkari on 29th August 2018 in New Delhi.
“Road construction which was at pace of 2 kms per day when NDA government took charge has reached 28 kms per day today and government has target of taking it to 45 kms per day in future,” said Nitin Gadkari, Union Minister for Road Transport & Highways, Shipping, Water Resources, River Development & Ganga Rejuvenation.
Under the TOT model, the asset recycling of operational national highways is done. First bundle of above model attracted investment of 1.5 billion, which was 1.5 times of NHAI estimate. The minister expects that second bundle to have an even higher response. “Government will provide all support to private players for dealing with centre and state governments,” Gadkari said.
“TOT will give assured returns to investors without risks associated with traditional highway building projects. State Bank of India, has given loan of 3.6 billion dollars to NHAI,” read a communiqué from the ministry.
The second bundle of over 586 kms is now offered spread over four States — Rajasthan, Gujarat, West Bengal and Bihar. The offer has 12 toll plazas across four highways. The stretches offered are operational highways with a proven tolling history of at least 2 years. The last date for submission of Bids is 05 December 2018.
