The government may raise Rs 35,600 crore by monetizing 75 national highway projects of 4,376 kilometre under the toll-operate-transfer (TOT) model.
The first package of bids, comprising 11 highway projects of about 700 km across Andhra Pradesh and Gujarat, is likely to be invited later this month or early October. By putting these roads under the hammer, National Highways Authority of India (NHAI) is looking to raise Rs 6,500 crore.
As per the TOT model, the private company will make an upfront payment to the government organisation in return for operation and maintenance rights. The toll collection rights can be up to a maximum of 30 years. As the projects will be ready or already constructed with two years of operations, only maintenance is what the private agency will have to look after.
Proceeds from the monetization of all these highway projects will go to the Consolidated Fund of India, and eventually be utilised by NHAI for future projects.
"Those private players who are already into operation and maintenance of road projects will participate in the bidding process," said Vikash Sharda, director, Capital Projects & Infrastructure at PwC.
According to the Icra report that has estimated that TOT projects will fetch the government Rs 35,600 crore, the concessionaires may face some trouble in raising funds.
"Given that the concession period for the TOT projects is expected to be 30 years, with permissible debt up to 80% of the concession fee and the absence of long-tenure debt (beyond 15 years currently), it could be difficult to avail debt equivalent to 80% of the concession fee," the report said.
Secondly, with such high debt levels, the TOT concessionaires will remain exposed to traffic risk, but the availability of past traffic data will help in better forecasting.
"Another area of major concern for the bidders will be the quality of the assets. For many engineering, procurement and construction (EPC) projects which are irregularly maintained in the past, the major maintenance requirement could be higher than the benchmarks, once the ToT concessionaire takes over the project," read the report.
But Sharda of PwC is of the opinion that financial investors should be interested in financing such projects as they have lesser risks.
Out of the 75 projects identified, nearly 26 projects or 35% are on the build-operate-transfer basis and the remaining 65% have been implemented on an EPC basis.
Research and rating firm Crisil in its report stated the government will give out rights of these 75 projects in another 2-3 years. "However, reforms such as the goods and services tax and implementation of the dedicated freight corridor may significantly impact traffic composition."
Of the total road portfolio under TOT, 25 projects or 33% are part of the golden quadrilateral, which witnesses high traffic volumes. The average daily toll collection on golden quadrilateral is around Rs 16 lakh, whereas on non-golden quadrilateral stretches, it is around Rs 7 lakh a day.
MONEY PLANS
- The company will make an upfront payment to the government organisation
- The toll collection rights can be up to a maximum of 30 years
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 "Toll-operate-transfer model")
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