Context- In order to encourage Public Private Partnership for Build-Operate-Transfer (BOT) projects, the Ministry of Road Transport and Highways (MoRTH) organized a conference with industry stakeholders in New Delhi.
About
- At present, initiatives are being awarded on Engineering Procurement Construction (EPC) or Hybrid Annuity Model (HAM) due to various challenges in implementation of BOT Projects.
- Many initiatives were taken for revival of BOT initiatives and diverse schemes like Harmonious Substitution, One Time Fund Infusion, Rationalized Compensation, Premium Deferment and allowing refinancing were followed within the past.
- Around 53 BOT (Toll) Projects for a duration of 5200 km worth Rs. 2.1 lakh crore have been identified and bids for 7 projects with a Length of 387 km well worth Rs. 27,000 crore were invited.
Investment models in India
- Infrastructure development has been a key priority in current years in India. Towards this Budget 2023-24 has allocated around Rs 10 lakh crore in the direction of capital expenditure.
- India will nevertheless require $ 1.4 Trillion investment to attain the goal of $ 5 Trillion economic system, for which diverse investment alternatives should be undertaken.
- There are distinctive investment models to be had for infrastructure introduction in India. The preference of model depends on various factors;
- assignment’s nature,
- monetary viability,
- chance allocation possibilities, and
- Government priorities.
Build-Operate-Transfer (BOT):
- Private entity designs, builds, operates, and maintains the infrastructure asset for a particular concession duration (generally 20-30 years).
- Revenue generated from the asset (tolls, consumer expenses, and many others.) belongs to the personal entity at some point of the concession duration.
- After the concession duration, the asset is transferred back to the government.
Advantages:
- Distributes risks and responsibilities between the government and private sector.
- Leverages private sector efficiency and expertise.
- Reduces prematurely government financial burden.
Challenges
- Ensuring affordability of services to the public.
- Potential for disputes over contract terms and performance.
- Managing risks like traffic or revenue shortfalls.
Build-Own-Operate-Transfer (BOOT)
- Similar to BOT, but the personal entity additionally owns the asset at some point of the concession period.
- Provides extra control and flexibility for the personal entity in project execution.
Advantages:
- Greater possession incentive for non-public region funding.
- Faster project development and innovation capacity.
Challenges:
- Ensuring asset pleasant and protection requirements upon switch.
- Balancing private interests with public needs.
Hybrid Annuity Model (HAM)
- Government shares initial project costs with the non-public entity.
- Regular annuity bills are made to the private entity throughout production and operation phases.
- Revenue risk is shared between the authorities and personal entities.
Advantages
- Reduces financial burden on the private entity upfront.
- Ensures more government control and oversight.
- More appropriate for initiatives with longer gestation intervals or lower sales capability.
Challenges:
- Requires careful chance assessment and allocation in contracts.
- Government wishes to ensure timely annuity payments.
Toll-Operate-Transfer (TOT)
- Government transfers existing infrastructure property to a non-public entity for operation and preservation for a designated concession length.
- Assets are transferred back to the government after the concession period.
Advantages
- Monetizes present assets and generates sales for the authorities.
- Brings in non-public region efficiency in operations and upkeep.
- Funds can be used for new infrastructure development.
Challenges
- Ensuring asset pleasant and maintenance requirements on the time of transfer.
- Managing potential toll hikes or service quality issues.
Engineering Procurement Construction (EPC)
- Engineering, Procurement, and Construction (EPC) is a contractual association generally utilized in large-scale and complex infrastructure projects.
- It entails a single contractor taking on the obligation for 3 key levels of a task: Engineering, Procurement and Construction.
Advantages:
- Single factor of contact simplifies task control and verbal exchange, as the owner deals with the most effective one contractor.
- Fixed charge and stuck agenda affords cost reality and avoids capability price overruns for the owner.
- Faster assignment execution: Streamlines the method by means of eliminating handovers among special entities for design, procurement, and production.
Challenges:
- High upfront charges: Contractor requires develop price to cowl all task ranges.
- Dependence on contractor performance: Owner’s success hinges on the contractor’s skills and threat control.
Way Ahead
- As in keeping with the Government of India’s ‘Vision 2047’ Plan, a large wide variety of excessive-pace corridors are envisaged to be developed.
- Robust Public Private Partnership in development of the road sector will play a pivotal role in realizing this vision and could significantly make contributions toward Operation & Maintenance of a world class National Highway Network in the country.
Source: PIB
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