Recently, the National Highway Authority of India (NHAI) took a landmark step by allocating Rs. 9,384 crore in the latest Toll Operate Transfer (TOT) round. This critical factor for the growth of Indian infrastructure needs to be scrutinized from a regulatory perspective, as it involves complex public private partnerships (PPPs) and contractual arrangements This article dives into the law of NHAI success itself in detail, examines the nuances of the TOT model, highlights potential challenges and explores strategies to build on these developments
Understanding the TOT model:
In the TOT model, the operating privileges of existing toll roads are transferred to private concessionaires for a specified period of time. In return, the franchisor collects taxes, absorbs their investment and operating costs, and makes a profit while maintaining and operating the highway This model forces private investment infrastructure and enables NHAI to unlock funding for its network expansion. Let us explore specific aspects of key practices and regulatory elements that are critical to understanding and building on this development
Highlights of the latest TOT round:
Consolidation of Highways: NHAI consolidated two highways with a total length of 273 km, attracting capital investment and increasing competition among bidders.
Competitive bidding: The transparent competition created competitive bidding, generated maximum revenue for NHAI and attracted reputed organizations.
Increased Savings: Rs. 9,384 crore raised, exceeding the initial target, indicating investor confidence in the TOT model and the Indian companies.
The TOT model operates under the aegis of several legal frameworks, including:
THE NATIONAL HIGHWAYS ACT, 1956: This act empowers NHAI to develop, maintain, and manage national highways, including through PPP models like TOT. Let’s delve into the specific sections of key acts and legal aspects crucial for understanding and building upon this achievement.
Section 3A Power to acquire land, etc.—(1) Where the Central Government is satisfied that for a public purpose any land is required for the building, maintenance, management or operation of a national highway or part thereof, it may, by notification in the Official Gazette, declare its intention to acquire such land. (2) Every notification under sub-section (1) shall give a brief description of the land. (3) The competent authority shall cause the substance of the notification to be published in two local newspapers, one of which will be in a vernacular language.
Section7. Fees for services or benefits rendered on national highways.—
(1) The Central Government may, by notification in the Official Gazette, levy fees at such rates as may be laid down by rules made in this behalf for services or benefits rendered in relation to the use of ferries, permanent bridges of which cost of construction of each of which is more than rupees twenty-five lakhs and which are opened to traffic on or after the 1st day of April, 1976,] temporary bridges and tunnels on national highways1 [and the use of sections of national highways].
(2) Such fees when so levied shall be collected in accordance with the rules made under this Act.
(3) Any fee leviable immediately before the commencement of this Act for services or benefits rendered in relation to the use of ferries, temporary bridges and tunnels on any highway specified in the Schedule shall continue to be leviable under this Act unless and until it is altered in exercise of the powers conferred by sub-section (1):
2 [Provided that if the Central Government is of opinion that it is necessary in the public interest so to do, it may, by like notification.
The Model Concession Agreement (MCA): This standardized agreement outlines the rights, obligations, and responsibilities of both NHAI and the concessionaire in TOT projects.
Article 2: Defines the project scope, rights, and obligations of both NHAI and the concessionaire, detailing operational responsibilities, toll collection mechanisms, and performance standards.
Article 5: Outlines the concession period, typically ranging from 20 to 30 years, determining the duration of private operations and revenue collection.
Article 8: Specifies maintenance and upgrade obligations of the concessionaire, ensuring adherence to high-quality standards for the duration of the project.
Overcoming Obstacles and Expanding on Achievement:
In order to deal with these issues and maintain the pace, NHAI may take into account:
Sturdy Dispute Settlement Procedures: Efficient arbitration or mediation processes can be put into place under the MCA framework to resolve disputes quickly and affordably.
Streamlined Clearances and Land Acquisition: Environmental clearances and land acquisition can be completed more quickly by working with state governments to streamline procedures.
Increasing the Variety of Income Sources:Revenue volatility can be reduced by looking into alternate revenue streams like roadside attractions or commercial development next to tolls.
Accountability and Transparency: Encouraging investors to have faith in a project by keeping financial transactions, bidding procedures, and project monitoring transparent.
The unprecedented success of NHAI in the TOT round heralds a favourable change in the funding environment for infrastructure in India. Navigating the legal complexity and possible obstacles, however, is essential for long-term prosperity. NHAI can take advantage of this momentum and use the TOT model to drive India’s infrastructure development journey to new heights by implementing strong legal frameworks, guaranteeing effective dispute resolution, and encouraging transparency.
Aditya Pratap is a lawyer and founder of Aditya Pratap Law Offices. He practices in the realm of real estate, corporate, and criminal law. His website is adityapratap.in and his media interviews can be accessed at http://www.youtube.com/@AdityaPratap/featured. Views expressed are personal.
This article has been assisted by Umang Pandey, a 3rd year law student pursuing B.A.LL.B. from Lloyd Law College, Greater Noida.