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 Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint

NHAI won't set reserve price for fifth TOT round

  • This move comes after the highest bids were below the base price in the second and fourth round of auctions and investors hesitant to commit large amounts of capital to public infrastructure amid covid-related uncertainty

MUMBAI: The National Highways Authority of India (NHAI) is likely to refrain from setting a reserve price for the upcoming toll-operate-transfer (TOT) auctions. This is a departure from past practice and comes in the wake of recent bids failing to meet the floor price set by it.

NHAI is likely to auction four to six toll plazas, primarily in Gujarat, a person aware of the discussions said, requesting anonymity. The concession period will be reduced from the earlier 30 years to 20 years and the bundle size is also expected to be significantly smaller, he said.

The move towards not setting a floor price may have been prompted by the fact that most investors are wary of committing large amounts of capital for public infrastructure amid covid-related uncertainties.

On Tuesday, CNBC-TV 18 reported that NHAI may invite bids for the fifth tranche of auctions in three weeks.

The TOT model was introduced in 2016 to monetise publicly-funded highways, where investors could make a one-time payment for toll collection rights for 30 years.

NHAI, the nodal agency of the road transport and highways ministry, has completed two rounds of such auctions since the programme was launched, but failed to generate enough interest with its third offering.

It is also struggling to close the auctions for the fourth bundle of roads, despite cutting the reserve price by half from 4,170 crore to 2,000 crore and delisting certain roads projects in Maharashtra. So far, it has pushed the deadline twice, but is not happy with the offers made by investors, said the person mentioned above. The auction for the fourth bundle may be cancelled as well, he said.

The nationwide lockdown to tackle the spread of covid-19 has hit NHAI’s plans to monetise its roads portfolio. The agency had hoped to raise 34,000 crore through TOT over FY19-22, and 1.06 trillion through private sector participation. Moreover, considering that the government allocation towards the roads ministry was lower than required in the last two budgets, NHAI is now being forced to depend on alternative funding avenues, such as TOT, to keep its roads construction programme on track.

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