Representative image
NEW DELHI: The government is looking to provide additional funds to highway builders to make projects under the Public-Private Partnership (PPP) model more financially viable, allowing private players to recover their investments through toll collection.Currently, such funding, known as Viability Gap Funding (VGF), is capped at 40% of the project cost. TOI has learnt that under the proposed plan, VGF beyond the 40% cap would be paid by highway authorities in instalments, through annuity payments.The matter was discussed at a high-level committee meeting held recently at NITI Aayog. A framework for the revised VGF mechanism will be developed, as the government is keen to attract more private investment in the infrastructure sector, sources said.The timing of the proposal is significant, considering that the National Highways Authority of India (NHAI) and the highways ministry are finalising an overhaul of the contract document for projects built under Build Operate and Transfer (BOT-Toll) mode to attract more investment in the highway sector. The NHAI leads among agencies with the maximum number of BOT-Toll projects (182), of which 25% have had to be terminated. Officials said the government has modified several provisions in the contract document to make the highway sector more attractive to investors. More changes are being made after getting feedback from private highway builders and project financing entities, including the proposal to make 95% of land available before start of construction work in BOT-Toll projects.“Provisions will be introduced to compensate for revenue shortfall annually, with a cap on such payment, if actual traffic flow is 10% less than the projected traffic in the first seven years and the concession period to collect toll would be increased or reduced by linking it to rise or fall in traffic. Now with FASTag tolling, there is hardly any scope for reporting wrong traffic data,” said an official.Modifications have also been proposed for termination payment by highway agencies to protect lenders’ interests. In a move aimed at curbing accidents, failure to correct faults to prevent recurrence of road crashes will be treated as a “default” by concessionaires.Striking a balancing act, the road transport ministry has also proposed to compensate private highway builders for delay on the part of NHAI and other agencies, including interest on debt due and operation and maintenance expenses, and through extension of contract period.