Privately funded motorway projects, whose prices have become low over the years, have been ended with an enhanced revenue protection clause, which was included in the revised concession pact. Under the revised model concession agreement (MCA) for construction and transfer projects (BOT-Maut), the production potential of a project would be reassessed every five years during the concession period compared to every ten years. As a result, the concession period is extended to an early start in the term of the contract, which increases the security of cash flow. Interest rates on annuities for HAM projects are considerable and amount to about 45% of total inflows during the concession period. In the TOT model, the right to collect and usurp royalties for certain operational projects of national highway (NH) built with public funds is granted to concessional dealers (developers/investors) predetermined with a prepayment of a lump sum to NHAI. This transfer of rights is based on the potential for toll revenue from identified NH projects. The operating and maintenance obligations (O-M) of these projects must be met by the dealer until the concession deadline. Dealers of such projects are designated as part of a pre-defined implementation framework and approved as part of a transparent and consistent procurement process. The Ministry of Road Traffic and Highways has adopted a hybrid annuity model for the implementation of highway projects in order to encourage private sector participation through appropriate incentives. The goal is to maximize the amount of highway projects implemented in the government`s available financial resources. Under this model, 40% of the project costs must be paid by the government as a “construction aid” for the private developer during the construction period, and 60% of the balance in the form of annuity payments during the concession period, as well as interest on the amount owed to the dealer. There is a separate provision for government payments made by the government to the dealership. The private party is not obliged to bear the risk of trafficking.
All payments were indexed by a multi-price index, which is a weighted average of WPI and CPI (IW) at 70:30 bases. This reduces the risk of inflation for the developer. “Currently, targeted traffic testing takes place during the ninth, tenth and eleventh years from the date of the concession agreement to measure fluctuations in traffic growth over the concession period. The revision of the five-year trial date is clearly positive, as projects that are fundamentally weak due to lower-than-expected base traffic would have the potential to increase the concession period at an early stage; On the basis of which lenders can consider extending the duration of the debt in order to align the obligations with the tolls and thus reduce the cash flow burden,” said Rajeshwar Burla of Icra. However, for the dealership, the revision of the concession period was limited, as before, to 20%. The increase in traffic due to diversions due to a competing corridor (value of the existing road network) and competing modes of transport (dedication of freight corridors or inland waterways) could be much higher and cannot be fully addressed within the 20% ceiling, said one dealer. The concession period has been set at 20 years. The emphasis on limiting liability to 100% of the total cost of the project, both for NHAI and for developers, is a great advantage for NHAI, given the huge requirements made by developers in the past, many of which have been several times the total cost of the project. Other important changes introduced in the revised McA are the flexibility required to conclude the contract with mutual agreement.