The Cabinet Committee of Economic Affairs ("CCEA") made certain amendments to the National Highways Authority of India's ("NHAI's") Toll Operate Transfer ("TOT") model by an amendment dated November 20, 2019 ("Amendment"), with a view to bring in more participation from private investors. The Amendment allows projects backed and funded by the government on an engineering, procurement and construction ("EPC") and build operate transfer ("BOT") basis and which have been operational for more than a year, to be monetized through the TOT model. Earlier such monetization on TOT basis was available to NHAI for projects that had been operational for at least two years. The monetisation of the highway using the TOT model will be subject to approval of the competent authority in the Ministry of Road Transport and Highways or NHAI on a case to case basis.

The amendment to the model brings the following salient features:

  • Utilisation of operational projects: NHAI has identified around 75 operational projects bundled into 10 separate bids for potential monetisation under TOT model.
  • Raising Funds: The fund raised from the proceeds of monetisation will be utilised by the government to meet its fund requirements and for future development of highways in the country including operation and maintenance of national highways.
  • Determination of Concession Period: Amongst other changes, NHAI is also given the authority to determine the concession period of the projects between 15 to 30 years as opposed to previous fixed concession period of 30 years under the 2016 TOT model.
  • Relaxation of eligibility: Under the 2016 TOT model, NHAI could monetise completed EPC BOT annuity highway projects, which had completed at least two years post commissioning on demonstrating stability in traffic numbers post commissioning. Now, NHAI would be allowed to monetise assets with lesser operational period and ensuring raising more finances by offering such projects to private players.

The CCEA's decision to reduce the period for highways to be eligible for monetisation is a welcome move and would serve as a lucrative proposition for private investors to bid for highway projects by providing wider sets of assets. This modification in concession will benefit investors in better assessment of risk - reward ratio, the sectoral challenges, risk and return projection.

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