On November 26, 2019 the Cabinet Committee on Economic Affairs (CEA) approved the proposed amendments in the Toll Operate Transfer (TOT) Model developed by the National Highways Authority of India (NHAI). These amendments are aimed at monetizing existing operational projects that have a 1-year history of revenue generation through tolls. The Ministry of Road Transport and Highways or the NHAI will approve projects for monetization on a case to case basis.
What is the TOT model?
- The TOT model was developed in order to raise funds from the monetization of existing operational projects.
- Under the TOT model, investors make lump sum payments to the NHAI, for the right to collect toll on these projects for long terms.
- The investors are assigned the right to collect tolls and operate the project for a pre-determined term in order to recover their investments.
- The TOT model was proposed to monetize projects that had been developed under other Public Private Partnership models.
- The aim of the NHAI is to reduce the investors' uncertainty in the existing TOT model and allow the NHAI to more efficiently monetize its existing assets.
- The additional funds received from the investments of the private sector are to be utilized for the operation and maintenance requirements of highways in India.
What are the changes proposed?
- The current TOT model considered existing projects that have been generating revenue for a minimum period of two years.
- The proposed amendments have reduced this period to 1 year of revenue generation so as to expand the ambit of the TOT model in order to make the proposition more attractive to investors.
- As such, 75 projects have been identified for monetization under the TOT model, which will be bundled under 10 separate bids.
- This is aimed at attracting the economies of scale of the private sector.
- Another significant change that has been reportedly proposed in the existing model is that the NHAI now would have the power to vary the concession period of the projects to 15-30 years as opposed to the present concession period of 30 years.
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