The Hindu : Business : Revenue sharing concept in BOT highways projects

Online edition of India's National Newspaper
Wednesday, Aug 31, 2005

Business

Business

Revenue sharing concept in BOT highways projects

P. Manoj

Revised model to be investor-friendly

BANGALORE: The Union Government has decided to introduce the concept of revenue sharing in the construction of highways undertaken by private operators on the build, operate and transfer (BOT) format under the direct tolling method.

Apart from the existing parameters of lowest capital grant sought by the private operator from the Government for building the highway or the highest negative grant which a bidder is willing to pay the Government for building the road, the bidder would also be required to share revenues collected as toll from the users of the facility according to a pre-determined percentage fixed by the Government.

While the lowest capital grant or the highest negative grant quoted by the bidder will continue to determine the award of the contract, the revenue sharing element will also form a key component of all future BOT highway projects being developed with private sector participation, a senior official with the National Highways Authority of India (NHAI) told The Hindu here.

The revenues collected from the toll would be shared annually and paid to the Government in the form of a concession fee. The Government at present levies a nominal concession fee annually for awarding the highway concession to the successful private operator.

The percentage of revenue that the private operator has to share with the Government will be spelt out in the revised model concession agreement for four/six-laning of highway projects.

"An inter-ministerial group (IMG) headed by L. K. Joshi, Secretary, Union Department of Road Transport & Highways, met in New Delhi on Tuesday to discuss and finalise the revised model concession agreement for the highways sector," the official disclosed. The revised model concession pact, finalised by the IMG, would be considered by the Committee on Infrastructure, headed by the Prime Minister, Manmohan Singh.

The Government had in 1999 finalised two model concession agreements — one for projects costing less than Rs. 100 crore and the other for those above Rs. 100 crore — and the same is being followed for awarding BOT contracts. "The revised model concession agreement for BOT direct tolling projects will be applicable to all irrespective of the value," he said.

The IMG comprising representatives from the Department of Road Transport & Highways, Ministries of Finance, Law and the Planning Commission, is also working on revised model concession pacts for BOT projects being developed on the annuity concept and also for operation, maintenance and tolling contracts awarded by the NHAI.

The revised model concession pacts would include simpler terms and are expected to be investor friendly, he added.

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