Policy Shift in Highway Development: Opening BOT Projects to Institutional Investors

The Ministry of Road Transport and Highways (MoRTH) has introduced a significant policy change designed to boost private participation in highway development. This involves inviting large institutional investors to engage in build-operate-transfer (BOT) road projects.

Background and Context

• Previous BOT model projects, worth nearly Rs 22,000 crore, failed to attract bidders.
• Earlier, large global and domestic funds engaged primarily in toll-operate-transfer (TOT) projects that provided stable toll revenue.
• BOT projects involve financing, constructing, and operating highways over 20-30 years, exposing investors to construction and execution risks.

Revised Eligibility Rules and RFP Framework

Under a modified request for proposal (RFP) framework, institutional investors can directly bid for BOT projects within the public-private partnership (PPP) model.

• Eligibility is extended to private entities, government-owned firms, Alternative Investment Funds (AIFs), foreign investment funds, natural persons, or consortiums.
• Financial eligibility is separated from construction capability, addressing previous deterrents for financial investors.
• Construction expertise can be fulfilled later through engineering partners or concessionaires post-project award.

Impact and Objectives

• The changes aim to make BOT projects more attractive to long-term capital providers.
• Large institutional investors’ entry into the BOT ecosystem could revive the model critical for expanding highway infrastructure.
• This initiative is intended to reduce the fiscal burden on public finances.

Current Execution Models

India's national highway network is developed through various models, including:

• EPC (Engineering, Procurement, and Construction)
• Hybrid Annuity Model (HAM)
• BOT
• InvIT structures
• TOT projects

The policy shift by MoRTH represents a strategic move to reinvigorate an essential model for India's infrastructure growth.