In a move aimed at providing a fillip to asset monetisation in the highways sector, the Ministry of Road, Transport and Highways has approved major changes in the model concession agreement (MCA), for highway projects bidded out on the Toll Operate and Transfer (ToT) model. The government has made provision in the MCA for compensation to concessionaire for revenue loss on account of capacity augmentation work on ToT stretches.
The Ministry of Road Transport and Highways had been planning to issue ₹18,000 crore worth bid for ToT, toll securitisation, as well as infrastructure investment trust (InVit), since the beginning of the current financial year, as a part of the asset monetization plan. While it has successfully rolled out the first InVit, having an enterprise value of ₹8,000 crore, ToT has remained on the backburner due to bid criteria.
The ministry now seeks to correct the same to incentivize the private sector to come forward for ToT projects. A top official tells Fortune India, “Major changes to the ToT MCA have been approved by the ministry. The changes allow the NHAI to undertake capacity augmentation and minor improvements in particular section of highways.”
“If the concessionaire faces revenue loss due to capacity augmentation being implemented by the NHAI, the authority will be bound to compensate the concessionaire. It has also been decided that if there is any increase or decrease in the tollable length due to the capacity addition on the highway under ToT, the compensation will either pay the money to the NHAI for tolling operation, and tolling on the additional stretch or receive compensation if the stretch is reduced,” the official adds.
Under the ToT, the NHAI transfers the maintenance operations and tolling rights to the private sector participant for a concession period, with a revenue share after a competitive bidding. There is no construction risk involved under the model for the private party—which handles only maintenance and toll collection. For the ministry of transport, ToT is one of the preferred models for highways developed with sovereign resources.
The industry sources, meanwhile, are in the process of seeking more clarity with the ministry and the NHAI on the manner in which the compensation will be calculated, and what will be the modalities of payment of the additional amount if the length of the section increases, after the capacity expansion work.