Govt may ease exit clause in highways sector

New Delhi: India could ease the exit clause in the highways sector for investors who want to sell them off after completion of construction. Looking to draw investors to the sector, the highways ministry is set to introduce a revised build-operate-transfer (BOT) model, making provisions for risk mitigation during the construction and concession periods, as it brings back focus on the mode of highway building after it failed to attract any takers for a few years now. The government is targeting to award 500 km of road projects on the model in the current financial year, and bids could be out in Q3 of FY21, a top official close to the development told ET. "“The exit period will be as minimum as possible, perhaps six months from the commencement of operations,” the official said. 77515767The construction period will be de-linked from the concession period, making it easier for companies to sell completed assets. In BOT projects, private sector developers build a road using their own funds, operate it and then transfer it to the government after a specified period. “We have tried to apportion this risk in such a way that the BOT model will practically be like EPC, only private-funded,” the official said. EPC or engineering, procurement, construction projects are fully funded by the government. “The BOT model was previously marred by huge litigation, as the risk factor in these projects was too high. What we are now trying to do is, limit the exposure of the private sector to macro-economic risks,” the official added.The new model will consider variations in traffic density during the concession period. If actual traffic is below what was projected, the concession period will be extended commensurately. For operation and maintenance, requirements will be the same as that in hybrid-annuity model, where earlier they were not clear for BOT projects. “This will make valuation of the projects much easier, in case of sale or takeover,” the official said. The premium, which previously was quoted in absolute numbers, will now be in correlation with the revenue of the project.

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