The National Highways Builders Federation (NHBF) has voiced serious concerns regarding the revised Model Concession Agreement (MCA) for Build-Operate-Transfer (BOT) toll projects in India. In a letter to the Ministry of Road Transport and Highways (MoRTH), the federation highlighted that persistent issues with risk allocation and project viability continue to discourage private sector involvement in vital highway development.
Despite welcoming several reforms within the revised MCA, the NHBF pointed to a recent trend of 'no bids' for numerous BOT (Toll) packages. This indicates that the industry still perceives the risk profile as unacceptably high, necessitating urgent government intervention.
Key Concerns Raised by Builders
The NHBF has called for changes on 16 specific issues to make highway projects more attractive to private developers and lenders. A primary demand is the removal of the ₹10 crore threshold for arbitration, arguing that restricting dispute resolution for smaller amounts creates investor apprehension. The federation advocates for an institutional or ad-hoc arbitration mechanism to ensure fair and accessible resolution.
Financial provisions also remain a point of contention. NHBF proposes reducing the annual premium escalation from 1% to 0.25%, asserting that the current rate imposes a substantial back-ended financial burden over the concession period. Furthermore, the federation seeks to reduce the existing 10% 'no-support band' for traffic risk to 5%, acknowledging the inherent uncertainties in traffic projections.
Concerns also extend to project termination clauses. NHBF objects to treating a 20% traffic decline over two consecutive years as a concessionaire default, arguing that macroeconomic conditions, competing road networks, or policy changes can cause systemic traffic declines beyond a developer's control. They also demand reimbursement of actual and demonstrable losses in cases of Authority Default or deemed termination, alongside ensuring that the 90% construction-zone requirement refers to physically available, encumbrance-free, and workable land.
Proposed Solutions and Alternative Models
Additional demands from the NHBF include compensation for delays caused by the authorities, revisions to the Change of Scope valuation framework, linking grant or equity support to physical construction milestones, and formal recognition of global supply-chain disruptions that impact project timelines and costs.
To address immediate private-sector participation needs while the BOT (Toll) framework is refined, NHBF has suggested that BOT (Annuity) be considered the preferred Public-Private Partnership (PPP) model. Under the annuity model, private developers undertake construction and initial operations against predetermined payments, significantly reducing traffic and revenue risks. The federation believes that mature assets developed under this model could subsequently be monetised through the Toll-Operate-Transfer (TOT) route, offering a sustainable path forward for infrastructure development.