In another step, which will be a respite for private developers, if a project is blocked as a result of proceedings against the dealer in the National Court of Companies under the Insolvency and Bankruptcy Act, the project will be closed instead of being terminated. NHAI will also pay the dealer a enforcement payment, the agreement says. The Ministry of Road Traffic and Highways has adopted a hybrid annuity model for the implementation of highway projects in order to encourage private sector participation through appropriate incentives. The goal is to maximize the amount of highway projects implemented in the government`s available financial resources. Under this model, 40% of the project costs must be paid by the government as a “construction aid” for the private developer during the construction period, and 60% of the balance in the form of annuity payments during the concession period, as well as interest on the amount owed to the dealer. There is a separate provision for government payments made by the government to the dealership. The private party is not obliged to bear the risk of trafficking. All payments were indexed by a multi-price index, which is a weighted average of WPI and CPI (IW) at 70:30 bases. This reduces the risk of inflation for the developer. The revised WAB also requires NHAI to check actual average traffic on a highway every five years instead of the existing 10 years. If the actual average traffic is behind target, NHAI will compensate the developer for the defect by changing the concession period.
“NHAI, with many changes to the model concession agreement, will be based on the BOT toll model to make it more attractive to private investors and lenders,” said a government official, who was briefed on the plan. In the TOT model, the right to collect and usurp royalties for certain operational projects of national highway (NH) built with public funds is granted to concessional dealers (developers/investors) predetermined with a prepayment of a lump sum to NHAI. This transfer of rights is based on the potential for toll revenue from identified NH projects. The operating and maintenance obligations (O-M) of these projects must be met by the dealer until the concession deadline. Dealers of such projects are designated as part of a pre-defined implementation framework and approved as part of a transparent and consistent procurement process. Highway projects are generally allocated to private developers for a period of 20 years, after which the project is handed over to NHAI. BOT projects are based on a public-private partnership model, in which private dealers build highways and then recover their expenses through tolls imposed on transport over a period of time. “What NHAI is trying to do is that there are a lot of loopholes in the existing concession agreement, implementation was not correct, that`s one of the reasons why the BOT toll model has become unattractive to investors and lenders. NHAI tries to simplify all these things to make them more practical; the entire concession agreement will be amended,” said the official, requesting that it not be mentioned. For example, if traffic is more than 5% below target, the remaining concession time will be increased by 1% for each 1% deficit relative to the transportation target. However, such an increase will not exceed 20% of the concession period, the agreement says.
