The National Highways Authority of India (NHAI) has scrapped the auction for the fourth bundle of highway projects to be awarded to a private operator under the toll, operate and transfer (ToT) model.

NHAI issued the tender cancellation notice on Monday ahead of the September 30 deadline for for submission of price bids. .

Bundle 4 assets

In October 2019, the NHAI invited bids for the fourth bundle of road assets. The highway agency had set the initial estimated concession value (IECV) at ₹4,170 crore for seven stretches totalling around 401 km, spread across Jammu & Kashmir, Punjab, Haryana, Rajasthan, Madhya Pradesh and Maharashtra.

In January, the NHAI pruned the value of the package by half to attract more bidders. Under the ToT model, the right to collect user-fee or toll on selected stretches built through public funding will be auctioned and assigned to a concessionaire for 20 years against an upfront payment of a lump-sum amount (concession fee) to the government.

The decision to scrap the bid for ToT bundle 4 was taken in the backdrop of a recent government decision to discontinue the practice of announcing the initial estimated concession value (IECV) for such projects at the beginning of the tendering process.

“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.

“When the IECV is declared upfront, large swings in price bid may not happen. Non-disclosure of IECV upfront is expected to attract quite a variation in bids,” said an industry source.

Reduced concession period

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

IECV refers to the discounted value (discounted at a rate equal to three percent above the bank rate for debt and a normative rate for equity return) of the net free cashflow expected to be generated by the project from the valuation date until end of concession period of 20 years, as estimated by the Authority.

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

The bidding process for ToT bundle 5A and 5B is currently on.

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