News
Revamped Model Concession Agreement for BOT (Toll) Projects on the Anvil
In a significant move aimed at revitalising private sector participation in highway infrastructure, the Ministry of Road Transport and Highways (MoRTH) is set to notify a revised Model Concession Agreement (MCA) for Build-Operate-Transfer (BOT) Toll projects within the upcoming month. The proposed changes follow a series of consultations and are intended to resolve longstanding issues that have hindered investor interest in the BOT (Toll) format, particularly following the underwhelming response to the version notified on 15th March 2024, released by MoRTH vide document no. NH-24028/14/2014-H (Vol-II).
A core feature of the revamped MCA is the alignment of key contractual parameters with actual traffic volumes. Under the new framework, concessionaires will be entitled to compensation or extensions in the event of traffic shortfalls, while the public authority may share in the revenue surplus should traffic exceed predetermined thresholds. This shift represents a calibrated move away from static benchmarks, seeking instead to establish a dynamic, performance-linked contractual regime. The traffic trigger for such relief mechanisms is proposed to be lowered from the existing 20% deviation to a more responsive 5%, thereby enhancing the commercial viability of projects and reducing investor exposure to demand risk.
Another notable reform under the upcoming MCA is the removal of the provision relating to “competing roads,” as the definition was widely scoped and inherently vague, rendering it difficult to enforce and giving rise to interpretational disputes. In recognition of these challenges, the revised framework does away with the concept entirely and instead introduces a traffic-linked compensation mechanism. This allows for an objective response to revenue impact regardless of cause. Additionally, in place of the provision on competing roads, a provision termed as the ‘buy-out principle’ has been proposed, enabling the authority to buy out the project, if warranted.
Additionally, reforms are anticipated in the pre-construction phase, which has historically been fraught with procedural bottlenecks. Rather than allowing construction to commence after partial, typically 80%, of land acquisition, the revised approach seeks to complete all statutory approvals, land acquisition, and financial appraisals prior to the commencement of the construction phase. This front-loading of clearances is intended to minimise disruptions during the construction phase, compress the construction timeline, and facilitate smoother operationalisation of national highway projects.
These changes are being introduced against the backdrop of the government’s renewed focus on BOT (Toll) as a key delivery mechanism for highway projects. With a sharp decline in BOT-based awards over the past decade and the growing reliance on engineering-procurement-construction (EPC) and hybrid annuity models (HAM), the proposed reforms signal a strategic policy recalibration aimed at restoring BOT’s role as a sustainable, market-driven model for infrastructure financing.
The forthcoming notification of the revised MCA will be a critical step in this direction, with the government seeking to address structural concerns and enhance the attractiveness of BOT projects. By introducing traffic-linked risk mitigation, scrapping restrictive provisions, and improving clarity on compensation mechanisms, the revised agreement aspires to usher in a more resilient and investor-aligned contractual regime.
