The government will soon offer 550km of roads to private companies to operate and collect tolls, in a move to get cracking on an asset monetisation plan.
The National Highways Authority of India will seek bids for the roads under the toll-operate-transfer (TOT) plan in Tamil Nadu, Uttar Pradesh, Bihar and Jharkhand next month, expecting to fetch about Rs 5,000 crore.
Details of the third round of auctions are expected to be finalised soon and bids will be invited in a month.
The government introduced the TOT model in 2016 to monetise publicly funded highways. Under the programme, investors make a one-time lump sum payment in return for long-term toll collection rights. The current TOT offers a 30-year lease.
The government is pursuing the TOT model to help raise resources in the sector and attract private funding, which has remained subdued. The first round of TOT auctions for 680 km of highways ended in February 2018.
It fetched the government over Rs 9,000 crore. The Macquarie Group won with a bid of Rs 9,681 crore against NHAI’s estimated value of Rs 6,258 crore. Brookfield Asset Management, IRB Infrastructure and Roadis-National Investment and Infrastructure Fund were among the other bidders.
However, the second auction was cancelled in February 2019 after it drew a lukewarm response. Cube Highways, a toll road operator backed by I Squared Capital and International Finance Corporation, bid Rs 4,612 crore against the base price of Rs 5,362 crore. Bids were also received from Adani Infrastructure and IRB Infrastructure in the auction. The expectations of bidders and the government in the second round did not match, the official said.
The NHAI expects the third round to succeed after making changes to the TOT framework to make it lucrative for the private sector.The NHAI expects the third round to succeed after making changes to the TOT framework to make it lucrative for the private sector. It had initially planned to re-bundle the 586 km stretches offered in Rajasthan, Gujarat, West Bengal and Bihar in the second round, but decided to offer fresh assets in the third round.
“We are coming out with new stretches… A decision will be taken later as to how to re-bundle TOT round 2,” an official said.
With the Bharatiya Janata Party government winning a second term, long-term institutional investors sense stability in the Indian market as a result of which better responses can be expected in the fresh round of auctions, said Vinayak Chatterjee, Chairman of Feedback Infra.
“It’s great to see NHAI coming up with fresh auctions in a short time. The roads ministry is setting a precedent in the asset monetisation plan of the government. I hope NHAI has learned from the first two rounds in setting the floor price this time,” Chatterjee said.
“We have taken all precautions that our initial estimated concession value (base price) is realistic and there are no issues, to a large extent, in these projects…. These should attract bidders,” the official said. The stretch to be offered in Tamil Nadu is “quite significant,” the official said. However, the official declined to share details because approvals are still being obtained.