Mint Explainer: Why does the government want to buy back congested highways?
The Union government is finalising a new model concession agreement for build-operate-transfer toll highways that will allow it to reclaim stretches of road once traffic touches a predetermined limit. What’s the rationale behind this?
The Union government is finalising a new ‘model concession agreement’ (MCA) for build-operate-transfer toll (BoT-toll) highway projects that introduces a major policy shift: an automatic buyback of tolled highways once traffic crosses a defined saturation point.
The move by the ministry of road transport and highways aims to ensure timely expansion of high-density corridors, protect investor viability, and bring greater clarity on contract termination and compensation.
BOT-toll is a public-private partnership in which a private company finances, builds, operates, and maintains a highway for a set period, recovering its costs through tolls before transferring ownership back to the government. This model allows the government to develop infrastructure while the private company takes on the financial and operational risks of construction and management.
With more than ₹2.1 trillion worth of BoT-toll projects in the pipeline, the revised MCA could reshape how India builds, operates and upgrades its national highways.
Mint explains how.
What is the government proposing under the new highway concession model?
One of the most significant provisions of the new MCA is the automatic buyback clause, which allows the National Highway Authority of India (NHAI) or the government agency awarding the project to reclaim a stretch of highway once traffic touches the 60,000 passenger car units (PCU) threshold for four-lane highways.
This automatic trigger will allow the government to reclaim saturated stretches for expansion and strengthening without having to wait for the concession period to end. PCU is a standard metric in transportation engineering, used to quantify the impact of different vehicle types on traffic flow, normalizing them against a single standard passenger car.
Why is the buyback linked to traffic thresholds?
Traffic of 60,000 PCUs is considered the maximum a four-lane highway can carry efficiently. By reclaiming highways once this limit is reached, the government can re-tender projects for widening, ensuring smoother movement on high-demand corridors.
The buyback clause will also allow the government to step in early for widening or strengthening, rather than having to wait 20-30 years for concession periods to end. With traffic rising rapidly on new greenfield stretches (those constructed on land where no previous road or infrastructure development existed), the government wants to prevent long periods of high congestion.
How will this change affect private developers and concession periods?
A buyback threshold set too low—around 45,000 PCUs, as some officials are considering—could shorten concession tenures to 12-15 years, making BoT projects less attractive for investors, who bear the full construction and traffic risk.
Developers such as IRB Infrastructure, Dilip Buildcon, PNC Infratech and Cube Highways could see reduced operational periods, which would affect their revenue projections. Investors have cautioned that premature contract closures could disrupt ongoing tolling operations and trigger renegotiation and compensation calculations more frequently. This is why 60,000 PCUs is the favoured level—it’s high enough to ensure concessionaires receive adequate returns before the buyback is triggered.
“Introducing a buyout option is a positive development since it offers greater clarity on termination-related compensation. At the same time, reducing the PCU threshold to under 60,000 could trigger earlier contract closures, which may disrupt ongoing operations," said Kuljit Singh, partner and National Infrastructure Leader, EY India.
What protections does the new MCA offer to investors and lenders?
To balance the early-buyback provision, the proposed MCA includes investor-friendly features such as government-funded compensations for toll revenue shortfalls, complete debt protection for lenders if a project ends midway, and allowing concessionaires to voluntarily sell back projects to unlock capital. The government will also have the power to substitute underperforming concessionaires while keeping lenders protected.
The buyback mechanism also aims to reassure private players that their capital is being protected.
How large is India's BoT-toll pipeline?
NHAI plans to award 53 BoT-toll projects, covering more than 5,200 km and worth ₹2.1 trillion, starting this year. Another 100 stretches of road worth over ₹3 trillion are being evaluated for BoT. These projects will likely operate under the revised MCA, meaning buyback provisions and enhanced investor protections will shape the next wave of private participation in national highways.
The government may also award more such projects as this frees up capital that would otherwise be locked up under the engineering, procurement and construction (EPC) model or the hybrid annuity model (HAM). EPC is a traditional construction contract in which the government bears the financial risk and the private contractor is paid to execute the work. HAM is a sophisticated public-private partnership (PPP) model that divides the financial risk between the government and the private developer, combining elements of EPC and BOT.
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