NHAI scraps practice of declaring estimated concession value of ToT road projects in bidding

P Manoj Mumbai | Updated on September 25, 2020 Published on September 25, 2020

During April to August 2020, NHAI has awarded 26 projects of 744 km length   -  THE HINDU

The National Highways Authority of India (NHAI) has decided to scrap the practice of announcing the initial estimated concession value (IECV) for toll-operate and transfer (ToT) highway projects put to tender to deter private firms from indulging in cartelization.

“The estimated concession value of each project (the initial estimated concession value of NHAI) shall be disclosed after receipt of technical bids and after declaring the selected bidder. The assessment of actual concession fee, however, will have to be made by the bidders,” NHAI said in a document.

The non-disclosure of IECV was approved by the inter-ministerial committee comprising ministry of road transport and highways, department of economic affairs, department of financial services, department f legal affairs and NITI Aayog at a meeting on September 10.

The NHAI has also decided to reduce the concession period for ToT road projects to 20 years from 30 years.

ToT model for road projects

Under the ToT model, the right to collect user-fee or toll on selected national highway stretches built through public funding will be auctioned and assigned to a concessionaire for a period of 20 years against an upfront payment of a lump-sum amount (concession fee) to the government.

Explaining the rationale to do away with the disclosure of IECV, a government official said: “ Disclosing the initial estimated concession value is probably one of the reasons why bidders are seen just sticking around that without having their own assessment. They are somehow trying to put one rupee above it or something like that. It is a kind of indirect cartelization. We want to stop that”.

The IECV will be now decided just before the financial bid are opened, he said.

The concession period was reduced to 20 years after private firms suggested that 30 years was too long a period for any kind of revenue visibility.

In the first ToT bundle, nine contiguous stretches of highways totalling 680 km generated a premium of $500 million for NHAI, translating into a premium of about $1 million per km. A consortium of Ashoka Buildcon and Australia’s Macquarie Group placed the winning bid of $1.5 billion against a reserve price of $1 billion (the net present value of future cash flows).

The second ToT package covering stretches in Rajasthan, Gujarat and West Bengal was below the reserve price and was scrapped.

Singapore-based toll road operator Cube Highways and Infrastructure won the third bundle of ToT highway project by placing the highest bid of Rs 5,011 crore.

The Cube Highways bid was a tad higher than the reserve price of Rs 4,994 crores set by the NHAI for some 566 kms of highways spread across Uttar Pradesh, Tamil Nadu and Bihar.

The bidding for the fourth ToT bundle is currently on.

NHAI is looking to raise Rs 84,800 crore by offering 6,165 km of highways under ToT by 2024, each involving a ticket price of about $1 billion.

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Published on September 25, 2020
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