• India approves monetization of national highways under TOT model

    The government on Tuesday approved a model under which toll highways operated by the National Highways Authority of India (NHAI) for over two years will be leased out to entities which will collect toll and operate the project for a specified duration, in a return for a fee. The money raised will be used to invest in developing more highways.

    In a tweet, the Union roads ministry said it has identified 75 national highway projects adding up to 4,500 km for the so-called toll-operate-transfer (TOT) model. The overall annual toll collected from these projects is about Rs2,700 crore. Projects under the TOT model will be awarded through international competitive bidding where foreign funds can also take part.

    Mint had reported on 10 October quoting NHAI chairman Raghav Chandra that the country is preparing to start the process of monetizing toll-based operational road assets under the TOT model, aimed to bring new investments to the highways sector.

    This will be India’s first exercise in auctioning NHAI’s operational projects after a cabinet clearance in August. Under the TOT model, the investor will collect toll and be responsible for operation and maintenance of the project. The TOT model will help attract long-term foreign investment, financial investors and investment bankers told Mint.

    I Squared Capital, a US-based investor in road projects, had told Mint in October that it was hopeful of NHAI finally launching its TOT programme, which could then serve as a model for other sectors as well.

    “As a global investor, we believe that NHAI’s TOT model, if executed properly, could be a win-win for everyone. Proceeds from TOT auctions will free up valuable taxpayer capital that can then be recycled for much-needed new infrastructure projects,” I Squared Capital had said.

    IDFC Alternatives, which has bought controlling stakes in operational road projects, is waiting to see the fine print, Aditya Aggarwal, partner (infrastructure), IDFC Alternatives told Mint in October.

    The model is likely to help NHAI raise upfront capital to fund road projects based on the engineering, procurement and construction (EPC) and hybrid annuity models. It will also be an opportunity for pension funds and infrastructure investors to invest in India’s road sector. Nyheim Hines Authentic Jersey

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