The National Highways Authority of India (NHAI) is set to revive the Build-Operate-Transfer (BoT) model in highway development by targeting project awards worth nearly sixty-two thousand one hundred twenty-five crore rupees during the current fiscal year. This marks a notable shift in the authority’s funding strategy, aiming to reduce dependence on public financing by re-engaging private sector participation through user-funded road development.
According to the NHAI’s tentative project pipeline, twelve highway projects spanning over 1,046 kilometers are planned to be awarded under the BoT model in the ongoing financial year. This marks a significant jump from the previous fiscal year, where only two BoT projects totaling 299 kilometers were awarded. The targeted BoT share of project awards this year stands at around 16 percent, indicating a broader institutional effort to balance funding sources across major highway development models.
The BoT model, once the mainstay of India’s highway development, had lost favour over the past decade. Between 2007 and 2014, BoT accounted for nearly half of all highway projects awarded. However, following a wave of financial stress in the private infrastructure sector, several developers withdrew from BoT projects around 2014, leading to a steep decline in private sector interest. To fill the financing gap, the government introduced alternative funding mechanisms, including the Hybrid Annuity Model (HAM) and Engineering, Procurement, and Construction (EPC) contracts.
The government’s reorientation toward BoT comes at a time when fiscal constraints are placing pressure on public infrastructure spending. Unlike HAM or EPC, where the government provides significant upfront capital or covers the full project cost, BoT places the responsibility of financing and construction on the private developer. In exchange, the developer is granted the right to collect toll revenue over a pre-agreed concession period, typically around twenty years.
One of the key attractions of the BoT model for developers is the potential upside in toll collections. If traffic volumes exceed projections, developers stand to benefit from higher revenues. Furthermore, BoT contracts typically incentivise better long-term maintenance. Since the developer is responsible for operating the highway and collecting tolls, there is a direct link between the quality of road infrastructure and the project’s revenue performance.
Officials familiar with the developments say that several regulatory changes have been made to revive interest in BoT. Revisions to the Model Concession Agreement (MCA) are aimed at de-risking private investment. These changes include provisions for early termination payments, clarity on revenue shortfall mechanisms, and enhanced dispute resolution frameworks. More adjustments are reportedly under review to further improve the investment environment.
The current year’s overall highway award pipeline from NHAI includes 124 major projects covering a total length of 6,376 kilometers. The total capital expenditure for these projects is projected to be around three lakh forty-five thousand crore rupees. Within this, the Hybrid Annuity Model continues to dominate, with 84 projects planned under HAM, spanning 4,714 kilometers and valued at two lakh forty-four thousand crore rupees. Meanwhile, the EPC mode will account for 28 projects, covering 616 kilometers at an estimated cost of thirty-eight thousand nine hundred forty-six crore rupees.
BoT’s renewed push reflects a gradual shift toward more balanced risk-sharing between the public and private sectors. In contrast, the HAM model, introduced in 2016 as a midway approach, involves the government providing 40 percent of the project cost during construction, while the remaining 60 percent is financed by the developer. The private partner then receives fixed annuity payments over the contract period. Under EPC, all costs and execution responsibilities rest with the government, and the contractor is paid on completion.
Despite its earlier decline, officials believe the BoT model is regaining traction among developers who now view it as an opportunity to build and operate high-quality, revenue-generating infrastructure. Improved confidence in traffic forecasting, along with revised concession terms and better dispute handling mechanisms, are seen as key drivers behind this recovery.
The twelve BoT projects in this year’s pipeline are expected to act as a litmus test for the viability of user-funded infrastructure under present market conditions. If successful, they may pave the way for a gradual resurgence of private toll-based infrastructure development in India’s highway sector.
Image- nhai.gov.in
