Toll Operate Transfer: Will NHAI be able to steer past coronavirus-induced roadblocks?

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Conceived as a mechanism for monetisation of highways, the Toll Operate Transfer (TOT) model adopted by the National Highways Authority of India (NHAI) is facing the brunt of the COVID-19 pandemic.

Although the NHAI has invited bids for the fifth bundle in Gujarat, it has been forced to cancel the fourth round.

Under the asset recycling programme, operational highways are provided to private entities on a long-term concession basis.

Questions remain over the efficacy of the TOT model in an economic environment which is not expected to shake off the jitters of the pandemic anytime soon.

"The TOT model was progressing well, but the COVID-19 impact is going to be felt and in a situation where investment is expected to be very difficult to come by, the NHAI will have to look at the TOT model as a very important source of monetising brown-field assets," Vinayak Chatterjee, Chairman, Feedback Infra, told Moneycontrol.

According to the NHAI, despite the debilitating impact of the coronavirus pandemic, it has managed to award 60 percent more projects during the first half of FY21 compared to the same period last year.

An analyst who tracks the roads sector on condition of anonymity said foreign investors have not quite warmed up to the TOT model.

"The foreign investors want matured assets. On routes or stretches which are not popular and which may be exposed to political protests, they will stay away from them," he said.

He added that after the first round of the TOT model, the response has not been on the expected levels.

"As of now, it cannot be termed as a success. In India, the contractor market has not been able to scale up and that is why the dependence on foreign investors or fund houses is now hurting," he added.

Has the NHAI been able to successfully convey to the investors the viability of the project and address their concerns?

"Yes, through active investor outreach programme, the NHAI has been able to communicate to the potential investors. Further, the NHAI has been very receptive to the suggestions of investors.  The TOT experience has helped the NHAI to create an array of offerings to various investor classes," Kushal Singh, Partner, Deloitte India, told Moneycontrol.

The NHAI has been under the cosh due to its debt levels and a muted response to the TOT model is likely to cast a big shadow over its capex programme.

The successful implementation of its asset monetisation plan hinges on a speedy recovery of the economy but signs are ominous.

It has already tweaked norms to ensure participation of smaller companies. It remains to be seen whether the bidders reciprocate in a positive manner.

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