The Government of India recently allowed the National Highways Authority of India (NHAI) to monetize public-funded national highways projects, which are operational and generating toll revenues for at least two years after the commercial operations date, under a toll operate transfer model. This move opens up brownfield investments in the highway sector to institutional investors. However, the monetisation will be subject to approval of the Ministry of Road Transport and Highways (MoRTH) or NHAI on a case-to-case basis. Around 75 operational highway projects completed under public funding have been identified for potential monetisation using the toll operate transfer model.
It was felt that a framework for attracting long-term institutional investment on the basis of future toll receivables could be created through monetisation of public-funded national highways. Market research showed that a few foreign institutional investors were keen to participate in operational highway projects with stable toll revenue outlook even if the investment was long-term.
At present, the concessionaire selected to operate, maintain and transfer contracts — completed and operational, is required to take care of the project for a period ranging from six to nine years. But with this proposal, public-funded highway stretches would attract better O&M, and hence, better quality services for the highway users.
The government will be able to use the amount from the proceeds to meet its fund requirements for future development and O&M of highways.