MoRTH revises BOT and TOT agreements to boost private sector investment

26 Mar 2024 CW Team

The Ministry of Road Transport and Highways (MoRTH) has introduced a number of revisions to the model concession agreements (MCA) for build-operate-transfer (BOT) and tolling, operation, maintenance, and transfer (TOT) projects. These changes aim to encourage private sector investment in road infrastructure and clarify existing agreements. Key amendments for BOT projects include providing construction support to ensure timely project completion and extending tolling periods to offset losses due to competing roads. The updated MCA also specifies compensation for force majeure events and termination payments if 40% of the project is complete during construction. Additionally, debt and equity provisions aim to align project costs with government projections. Furthermore, the authority will continuously access escrow account statements to prevent funding shortages and project delays. The road ministry notified that these amendments were made following extensive consultations with stakeholders and implementing agencies. Changes in TOT agreements include increasing the frequency of checks to three times and lowering the threshold for variation in toll collection to 5%. These adjustments ensure upfront modifications to the concession period based on toll collection variations. Akshay Purkayastha, Director of Consulting at CRISIL Market Intelligence and Analytics, views the amendments positively, particularly regarding debt obligations, capacity enhancement, and compensation clarity. However, the impact of these changes on BOT projects' revival remains uncertain. Under MoRTH, the National Highways Authority of India plans to auction 53 projects worth over Rs 2,200 billion, covering 5200 kilometres. Currently, projects predominantly follow engineering procurement construction (EPC) or hybrid annuity mode (HAM) due to implementation challenges with BOT projects.

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