Highways Sector
- August 24, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Highways Sector
Subject :Economy
Section: Infrastructure
Context: Union Road Transport & Highways Minister Nitin Gadkari said that the highways sector in India has immense potential as a driver of growth in the economy.
Concept:
Models of highway development:
There are combinations of models used in India —
- BOT (build operate transfer)-
- This is the simple and conventional PPP model where the private partner is responsible to design, build, operate (during the contracted period) and transfer back the facility to the public sector.
- Role of the private sector partner is to bring the finance for the project and take the responsibility to construct and maintain it.
- In return, the public sector will allow it to collect revenue from the users.
- The national highway projects contracted out by NHAI under PPP mode is a major example for the BOT model.
- TOT (toll operate transfer) models-
- TOT is an asset recycle programme wherein, already operational National Highways are given to private entities on long-term contracts.
- Total contract period of a TOT is 20 years in which a concessionaire would be required to maintain and operate the stretch.
- Hybrid annuity model or HAM-
- Hybrid Annuity Model is a mix of the EPC and BOT models.
- EPC stands for Engineering, Procurement, and Construction and refers to that method of infrastructure growth wherein the government pays private companies or players to lay roads.
- The government will contribute to 40% of the project cost in the first five years through annual payments (annuity).
- The balance 60 per cent is arranged by the developer, and is recovered as variable annuity amount after the completion of the project from NHAI which collects revenue.
- Hybrid Annuity Model is a mix of the EPC and BOT models.
- Infrastructure investment trust-
- It is a Collective Investment Scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects.
- They are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time. Part of this cash flow would be distributed as a dividend back to investors.
- The InvITs are regulated by the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
Other models:
- Build-Own-Operate (BOO):
- This is a variant of the BOT and the difference is that the ownership of the newly built facility will rest with the private party here.
- The public sector partner agrees to ‘purchase’ the goods and services produced by the project on mutually agreed terms and conditions.
- Build-Own-Operate-Transfer (BOOT):
- This is also on the lines of BOT. After the negotiated period of time, the infrastructure asset is transferred to the government or to the private operator.
- This approach has been used for the development of highways and ports.
- Build-Operate-Lease-Transfer (BOLT):
- In this approach, the government gives a concession to a private entity to build a facility (and possibly design it as well), own the facility, lease the facility to the public sector and then at the end of the lease period transfer the ownership of the facility to the government.
- Lease-Develop-Operate (LDO):
- the government or the public sector entity retains ownership of the newly created infrastructure facility and receives payments in terms of a lease agreement with the private promoter.
- This approach is mostly followed in the development of airport facilities.
- Rehabilitate-Operate-Transfer (ROT):
- Under this approach, the governments/local bodies allow private promoters to rehabilitate and operate a facility during a concession period.
- After the concession period, the project is transferred back to governments/local bodies.
- DBFO (Design, Build, Finance and Operate):
- In this model, the private party assumes the entire responsibility for the design, construction, finance, and operation of the project for the period of concession.