India Revives Build-Operate-Transfer Model for Major Highway Expansion
The Indian government is bringing back a familiar approach to highway development. Officials plan to bid out half of the national highway projects scheduled for the 2027 fiscal year under the Build-Operate-Transfer model. This marks a significant policy shift after nearly a decade.
Massive Investment in Road Infrastructure
This initiative involves 5,000 kilometers of new highways with an estimated value of Rs 75,000 crore. The government aims to attract private developers to finance, construct, and operate these roads. Private companies will recover their investment through toll collection over concession periods typically spanning 20 to 30 years.
The revival comes after the BOT model saw declining popularity since 2014. During its peak around 2011-2012, this approach accounted for over 90% of highway contracts. However, investor concerns about risk and liquidity issues caused a sharp decline. No projects were awarded under this model during 2018-2020.
New Agreement Boosts Investor Confidence
Government officials attribute renewed interest to a revised Master Concession Agreement. This updated framework offers better protection and flexibility for private investors. Key improvements include clearer exit options, compensation mechanisms for revenue shortfalls, and provisions for project substitution when necessary.
"Highway construction now provides better rewards while reducing risk for investors," explained one official familiar with the plan. "The new agreement features easier entry and exit clauses along with compensation for toll revenue variations."
Why the Timing Makes Sense
Several factors make this revival particularly timely. First, FASTag adoption has exceeded 95%, ensuring reliable electronic toll collection. This provides private operators with predictable revenue streams. Second, improved traffic monitoring allows for better forecasting of usage patterns.
The Ministry of Road Transport and Highways plans to award contracts for 10,000 kilometers of highways in fiscal year 2027. Half of these will follow the BOT approach. This strategy could free up substantial government funds for other priorities.
Major Projects in the Pipeline
Several significant projects are scheduled for bidding next fiscal year. These include:
- The eight-lane Nashik-Phata-Khed National High-Speed Corridor
- Badvel-Nellore corridor in Andhra Pradesh
- Six-lane road from Jawaharlal Nehru Port Trust to Chowk
- Upgradation of Khagaria-Purnia highway to four lanes in Bihar
- Outer ring road in Thiruvananthapuram
- Northern Jaipur ring road
- Tharad-Ahmedabad high-speed corridor
These projects form part of a larger infrastructure pipeline worth Rs 8.77 trillion that the finance ministry recently finalized for implementation through March 2028.
Industry Welcomes the Return
Major infrastructure companies have expressed optimism about the BOT revival. "The government has articulated clear plans to increase public-private partnership awards," noted a spokesperson for IRB Infrastructure. "With FASTag penetration exceeding 95%, revenue visibility has improved significantly."
Industry experts emphasize the financial benefits for the government. "BOT projects require private operators to bear the entire capital expenditure," explained Kuljit Singh of EY India. "This frees up government resources for other critical infrastructure needs."
The government recently approved the country's largest BOT project - the Rs 19,142 crore Nashik-Solapur-Akkalkot highway corridor in Maharashtra. This 374-kilometer, six-lane access-controlled highway signals serious commitment to the model's revival.
Officials expect the new Master Concession Agreement to be finalized before bidding begins for fiscal 2027 projects. The return of BOT projects represents a strategic shift toward leveraging private capital for India's ambitious highway expansion goals.
