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The central government is preparing a new policy framework to revive private investment in the highways sector, targeting projects worth around INR 1 trillion, or USD 11 billion, to be awarded by FY27. Private participation had weakened due to revenue risks and regulatory delays, with most projects shifting to government-funded models. The proposed changes aim to improve revenue protection, ease approvals, and allow financial investors to bid independently. The move aligns with broader infrastructure plans and a proposed Infrastructure Risk Guarantee Fund announced in the latest budget.
The government is taking steps to re-engage private investors in highway development after years of limited participation. A new framework is being prepared to address long-standing concerns related to revenue uncertainty, delays in approvals, and competition from parallel road infrastructure. Officials familiar with the discussions have indicated that the revised rules are designed to restore investor confidence and align India's highway development process with global practices. Advertisement
Under the proposed plan, highway projects worth nearly INR 1 trillion, equivalent to about USD 11 billion, are expected to be awarded to private players by FY27. The government is aiming for private investment to contribute up to 25% of highway construction during this period, a significant rise from the low single-digit share seen in recent years. Most road projects over the past decade have been awarded under government-supported models due to weak private interest.
Private investment declined sharply after developers faced challenges under the Build-Operate-Transfer (BOT-Toll) model, where toll revenue risks and delays in land acquisition and clearances affected project viability. As a result, the Hybrid Annuity Model and Engineering, Procurement and Construction contracts became dominant. Data shows that between April and November last year, only about 1% of highway projects were awarded under the BOT-Toll model.
The new framework is expected to allow financial investors, including global infrastructure funds, to bid for projects first and appoint construction partners later. This structure is commonly used in international markets and could help attract long-term capital. The government also plans to streamline approvals and address issues arising from competing road corridors that impact toll collections.
These measures are part of a wider infrastructure push outlined in the latest budget presented by Nirmala Sitharaman, which increased overall infrastructure spending. Allocations for roads and bridges were raised to INR 3.1 trillion. The budget also announced the creation of an Infrastructure Risk Guarantee Fund to support private and public-private partnership projects by mitigating key risks.
Officials have noted that India's high-speed road network needs to expand several times over the next decade to meet freight and mobility requirements. Estimates suggest that achieving this scale could require investments of around INR 11 trillion, making private capital critical for sustaining long-term highway development.
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