New Delhi: The National Highway Authority of India, or NHAI, will give developers the option of extending the concession period by up to five years if the traffic reaches the maximum level, provided the developer adds more lanes to the road.

NHAI member finance Didar Singh said the highway authority was giving the option of extending the concession period as a incentive for developers to improve the road by increasing the number of lanes.

Under current regulations, applicable for contracts signed after 2007, the highway authority retains the right to terminate a contract if traffic on the highway reaches more than 60,000 passenger car units, or PCUs per day for a four lane highway, 1,20,000 PCUs for six lane ones and 1,80,000 PCUs for eight-lane highways. The highway industry counts traffic in terms of passenger car units, with trucks and other heavy vehicles being multiples of one PCU.

These are only applicable for those national highways that are financed and operated by private companies. The highway authority is looking to generate more than half the projected expenditure of Rs3.3 trillion until 2015-16 from the private sector.

Analysts said giving developers the incentive was a good thing because the users are paying for the government. In scenarios where termination occurs, the highway authority would have to make termination payments, like 150% of the equity and all of the debt outstanding, said Kushal Kumar Singh, a senior manager with consulting firm Pricewaterhouse Coopers.

Government reforms and infrastructure development practice.

Didar Singh also said the government had recently increased the extent of permissible crossholding between bidders for highway projects to 25%, from the current 5%. The highway sector had in recent times been affected by regulations governing conflicts of interest between highway bidders, with developers saying the current 5% cross holding limit was too low.