Centre takes toll route to fund highways

Floats new Toll-Operate-Transfer model; to transfer toll road to private cos

In a bid to raise additional funds to finance the highway projects, the ministry of road transport and highways has mooted a proposal to monetise public funded national highway projects in which the government is currently collecting the toll charges.

The plan, according to industry sources, is to award these toll roads to private sector for operations and maintenance for a fixed period for an upfront value. The private players include infrastructure developers, private equity funds and institutional investors like pension funds and wealth funds.

This will ensure fresh capital inflows to the government, which can be further invested in creating new road infrastructure. There are currently 104 toll roads across the country in which the government is collecting the toll revenue.

According to a study done by the road ministry, there are about 44 projects out of the total 104 projects where the annual revenues earned through toll collections are more than 10 per cent of the total project cost.

In 24 projects, the annualised toll collection is five to 10 per cent of the total project cost while it is less than five per cent in 34 projects.

The proposal also known as toll operate transfer (TOT) model, which is in the initial stages of discussion, is yet to determine the scope of the concessionaire (private player), the eligibility criteria for bidding and the period of concession.

A discussion is also on with the ministry about the number of projects (whether it should be a single project or a portfolio of projects) that could be awarded to a single entity. The concept has already been tested in some of the developed countries, say industry sources.

For instance, the toll operation and maintenance of the Chicago Skyway project was awarded to a consortium of Cintra-Macquarie for a concession period of 99 years. The consortium made a bid for $1.83 billion to bag the contract.

Similarly, a consortium of Goldman Sachs and Abertis placed a winning bid of $1.43 billion to operate and maintain Puerto Rica PR-22 highway for a period of 40 years.