Private firms may get dole for toll losses

The government plans to compensate private companies taking up road contracts on a build-operate-transfer basis in case toll revenues fall short of expectations.

The road transport and highways department is considering sharing the "traffic risk" with private companies.

"We are trying to work out a mechanism by which there is a division of the traffic risk between a private operator and the government," an official told Business Standard.

The risk-sharing would entail monetary compensation, which private firms could avail of only if traffic fell below a benchmark set by the Centre, the official added.

The department was in the process of finalising a policy of this, officials said.

At present, private road builders working on the BOT basis have to bear the entire risk if vehicular traffic is below projections made at the time of bidding for projects. But for annuity projects, the government bears the entire traffic risk.

In fact, under the first two phases of the National Highway Development Programme, a majority of projects were either government-funded or taken up on the annuity basis.

With the government taking a stand recently that most new road projects will be taken up on the BOT basis, efforts are being made to make these projects more attractive for private players.

Officials pointed out that the traffic risk was the most critical element for any private company building roads on the BOT basis as it determined the revenue flow and the financial viability of a road project.

They, however, added that it was a tricky business as traffic volumes often did not match projections.

Ride On

• The government is trying to work out a mechanism by which there is a division of traffic risk between a private operator and the government
• The department was in the process of finalising a policy of this.
• At present, the government bears the entire traffic risk for annuity projects, but private road builders working on the BOT basis have to bear the entire risk.