The recent award of five stretches of national highways under phase V of the National Highway Development Programme (NHDP) marks the implementation, for the first time, of a clause that allows for reducing or extending the concession period, depending on traffic growth in a designated review year.
Wider roads: A file picture of the Taj Expressway. The fifth phase of the National Highway Development Programme envisages the six-laning of nearly 6,500km of highways from the existing four lanes.
The clause was included in a model concession agreement ratified by the Committee on Infrastructure in order to possibly gain from huge increases in traffic in certain stretches of road — particularly those that run along industrial belts.
The model concession agreement — applicable for public-private partnerships in the country’s mammoth road building programme — aims to standardize the regulatory framework governing private investments in infrastructure projects.
The Planning Commission estimates that the private sector should contribute at least 30% of the country’s projected infrastructure spend of Rs20 trillion over the next five years.
The model concession agreement states that if actual traffic falls short of the estimated traffic 10 years after the concession agreement is signed, then the concession period could be increased by as much as 1.5% (of the original concession period) for every 1% decrease.
Conversely, if traffic were to exceed targeted traffic, then the concession period could be reduced by 0.75% for every year 1% increase.
The agreement also provides for a cap on the amount of increase or decrease in the concession period.
The target traffic is based on a compounded annual growth rate of 5% over the base traffic, with the review year being ten years from the date of the concession agreement.
Analysts say that while it is impossible to gauge how much traffic would grow over the next 10 years, in some stretches of roads, traffic growth could exceed the 9% growth rate of the economy.
“I don't see a reason why, if the risk is being shared, the benefits cannot be shared,” said a concessionaire who did not wish to identified, citing contractual obligation to the National Highways Authority of India.
The agreement is also especially generous for the fifth phase of the NHDP because concessionaires can start collecting toll revenues from the day the concession agreement is signed. The fifth phase envisages the six-laning of nearly 6,500km of national highways from the existing four lanes.
“I think it is a very equitable arrangement,” said a Planning Commission spokesperson who did not wish to be identified. “While framing the regulations, we have ensured that there is a certain comfort level for the concessionaires. That is why, the increase in concession period (if traffic decreases) is more than the rate of decrease,” the official said.
“Although it is a little futuristic to be able to tell whether this clause (increasing or decreasing concession periods) will be invoked, I think traffic growth will at least keep pace with the economy,” said Amrit Pandurangi, who heads the infrastructure and transport practice for consulting company PricewaterhouseCoopers.