NHAI May Revert To Build-Operate Transfer Model, Says ICRA
A truck stops at a toll booth at the Manesar toll plaza on National Highway 8 (NH 8) in Manesar, Haryana, India. (Photographer: Udit Kulshrestha/Bloomberg)

NHAI May Revert To Build-Operate Transfer Model, Says ICRA


Rating agency Icra said the National Highways Authority of India may revert to build-operate-transfer mode of projects due to increasing financial burden.

“The share of the build-operate-transfer (Toll) projects in the overall awards has declined sharply (being made primarily through the EPC/hybrid annuity mode); thereby increasing the financial burden on the NHAI. To overcome this, the NHAI may revert to the BOT (Toll) mode of project awarding,” ICRA said.

There has been a lot of debate in recent times about the need for the NHAI to focus on asset monetisation and tap alternate funding avenues such as toll-operate-transfer and infrastructure investment trusts, given the huge funding requirement for the ongoing Bharatmala Pariyojana programme, it added.

The rating agency, in its earlier observation, said that it has already highlighted the importance of speeding up the TOT awards and other fund-raising initiatives to meet the large funding requirements of the ambitious programme.

However, the progress on both these fronts has been slow till date.

“Risk averseness of road developers has increased over the last few years. Even today, many developers’ balance sheets cannot support huge equity investments towards BOT projects,” Rajeshwar Burla, Vice President and Associate Head, Corporate Ratings, ICRA said.

“Further, the transportation sector is undergoing transformational change with alternate modes viz. dedicated freight corridor and inland waterways which would result in a modal shift from road to these modes over the medium to long term,” he added.

In addition, the road network itself is undergoing significant changes with some of the economic corridors under Bharatmala competing with few existing stretches, Burla said.

Overall, these factors would make the traffic forecasting extremely challenging. Therefore, BOT model in its current form may not have many takers. Achieving financial closure also would be a challenge given these uncertainties, he said.

Also read: Crisil Cites “HAM In A Jam” To Lower Road Project Execution Target

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