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The build operate transfer (BOT-toll) mode for building highways appear to be catching up this year, with ITNL, Dilip Buildcon, IRB Infrastructure, Essel Infra and Essel Projects, bidding for projects.
In the current fiscal, bids have been received for some seven projects and awarded for one, for developing 1000 km of highways on a public-private-partnership mode at a cost of over ₹ 13,000 crore. This is quite a departure from last year, when some 16 bids for building highways on a public private basis (PPP) basis did not get any response.
However, the BOT-toll bids also show a departure from the high of 2010-11 and 2011-12 days. Then there was a massive response for each bid, high-level of competition, and most of the projects were being awarded in a manner that bidders/developers were offering premium to government.
This year, of the seven bids under processing, most of the projects – barring one -- have sought subsidies, also called viability gap funding, from government to develop the highway stretches. “Seven bids in respect of projects to be implemented on PPP mode of delivery have been received by NHAI and are being processed,” Rohit Singh, Joint Secretary-Highways, told BusinessLine.
“With signs of recovery in GDP, bidders expect traffic to pick up and also expect better cash-flows. But market pessimism is evident from the level of competition which is less compared to 2011-12 levels or even the projects bid out on engineering procurement contract (EPC) basis,” another official said.
The official further explained that the projects being awarded on EPC are such that bids are being received at 15-20 per cent lower values than expectations. “In effect, contractors are willing to build projects at lesser costs than those estimated by government,” the official said. Last fiscal, a sizable number of projects – about 2,300 km out of total of 3,067 km – were awarded on an EPC basis by the NHAI.
From a competition and market response perspective, projects awarded on BOT-toll are less favourable to government and those awarded on EPC are more favourable to government, said the official. Few developers are cash rich enough to be able to be able to put in equity. But from money spent by the Government perspective, PPP projects are more favourable.
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