NHAI bets big on private players in road sector

The National Highways Authority of India is relying on the private sector for constructing more than half of the projects during the current fiscal, a sharp shift from last year, when 60 per cent of the road length was executed on EPC or government-funded mode, said official sources. The latest estimates by NHAI is that project execution would be more in the private domain since the government is facing liquidity issues and the build–operate– transfer (BOT) and hybrid-annuity could boost private sector investment. NHAI has set a target of building 4,500-km of highways in 2020-21, of which 40 per cent would be executed on hybrid-annuity and around 5-10 per cent on the BOT model. The remaining road projects will be executed through EPC, where contractors are paid directly by the government and they do not incur any traffic risk. EPC exposes the agency to more liquidity issues in the future but the saving grace is the tolling revenue. To drive the investor sentiment back in the BOT segment, NHAI has introduced the harmonious exit clause in the new concession pacts for the BOT projects. According to the draft MCA, NHAI and the concessionaire would agree that in case of any financial default, the lender can invite, negotiate and procure offers, either by private negotiations or public auction or tenders for the takeover and transfer of the project in the highway sector.