Highway Builders Seek BOT Model Overhaul Amid Investment Woes
By Business Desk
India’s highway developers urge revisions to 16 BOT model clauses, citing arbitration and traffic risk concerns that threaten private investment in infrastructure projects.
The National Highways Builders Federation (NHBF) has called on the Ministry of Road Transport and Highways to reassess key provisions within the recently updated Build-Operate-Transfer (BOT) model concession agreement. The federation specifically highlighted 16 critical clauses requiring changes, citing issues with risk allocation, project viability, and financial sustainability.
A significant concern for developers revolves around the arbitration clause. Current guidelines from the finance ministry mandate that disputes exceeding Rs 10 crore must be resolved through a conciliation mechanism, rather than arbitration.
- The NHBF argues that this monetary limit creates apprehension for investors and lenders.
- They advocate for its removal to ensure effective and timely dispute resolution through an appropriate arbitration framework.
Reclassifying Traffic Drop Defaults
The federation also seeks a review of provisions related to concessionaire default, particularly concerning a 20 percent drop in highway traffic. Developers argue such significant traffic declines frequently stem from macroeconomic conditions, competing road networks, or policy changes.
- These factors are beyond a developer’s control, the NHBF contends.
- They propose reclassifying such scenarios as an authority default.
- Termination payments should then be calculated under Authority Default terms to safeguard Debt Due and Invested Equity.
The NHBF has issued a warning that without government intervention on these core concerns, future tenders are likely to face zero-bid scenarios. This lack of private sector participation could significantly hinder highway development projects.