Road transport and highways ministry has designed a draft model concession agreement (MCA) for the four-laning of national highways on build-operate-transfer (BOT) annuity mode. The move comes on the back of claims by ministry officials that the current MCA governing national highways needs to be tweaked for BOT annuity projects even as it is suitable for BOT toll projects. One of the key reasons for this seems to be the possibility of exploring the annuity mode of award for future projects.

In BOT (annuity) mode no viability gap fund is made available and the entire project expenditure is to be met by the concessionaire. The project cost/ investment is recouped by the concessionaire through annuity payments made by NHAI for a pre-specified period after the construction is over.

However, in BOT (toll) mode, the concessionaire is required to recover investments through receipt of tolls and is also eligible to receive a specified percentage of viability gap fund towards capital expenditure.

According to the new draft MCA for annuity projects, concessionaires will be allowed 20 years as concession period for recovering the cost. The MCA has done away with the clause which says that in the event six-laning is not undertaken the concession period should be deemed to be 12 years, thereby removing uncertainty for the concessionaires.

The draft MCA also works on a carrot-and-stick policy for both the NHAI and the developer. In case delays are on account of NHAI not fulfilling certain pre-conditions such as providing the right of way to the site and approvals from the railway authorities, it will have to pay penalty to the developer. This implies that in case the developer is limited from taking on construction even on account of land acquisition delays by NHAI, the latter will have to pay damages. In case right of way is not procured, NHAI will compensate the concessionaire at the rate of Rs 50 per day for every 1,000 square meters.

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