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• The Centre is preparing to invite bids for select national highway projects under a new toll-cum-annuity model aimed at reviving private participation in road development.
• The proposed framework combines features of the traditional Build-Operate-Transfer (BOT) and Hybrid Annuity Model (HAM), while providing upfront government support for financially challenging projects.
• Officials believe the revised concession structure will improve project bankability, optimise risk allocation and attract long-term infrastructure investors.
• The model is expected to form part of a revised Model Concession Agreement (MCA) currently being finalised by the Ministry of Road Transport and Highways.
After several highway projects struggled to attract bidders under existing public-private partnership models, the Centre is preparing a new framework designed to make road investments more attractive to private developers. The proposed toll-cum-annuity model seeks to strike a balance between construction risk, revenue certainty and operational incentives by combining elements of two established concession formats. Officials expect the revised approach to encourage fresh investor interest while accelerating the rollout of national highway projects.
The Ministry of Road Transport and Highways is finalising a revised Model Concession Agreement (MCA) that will introduce the toll-cum-annuity model for selected national highway projects. The framework is intended to improve the financial viability of projects, strengthen investor confidence and increase private sector participation in highway development.
The proposed concession structure blends key features of the Build-Operate-Transfer (BOT) and Hybrid Annuity Model (HAM). While private concessionaires will continue to collect toll revenue during the concession period, the government will provide financial support during construction for projects requiring viability gap funding. This approach aims to reduce upfront financial pressure while allowing developers to retain an incentive to improve operational performance.
Under the proposal, government assistance during construction could range between 10% and 25% of project cost for eligible highway projects requiring viability gap funding of 40% to 70%. By sharing part of the construction burden, the government hopes to make projects with weaker commercial viability more attractive without shifting the entire financial responsibility to the public sector.
The revised model emerged after several highway projects offered under the conventional BOT route failed to receive adequate investor response despite repeated bidding attempts. Industry participants have cited traffic uncertainty, financing challenges and uneven risk allocation as factors limiting private participation. The proposed framework seeks to address these concerns through a more balanced distribution of project risks between the government and concessionaires.
Officials from the National Highways Authority of India (NHAI) have already discussed the proposed changes with industry stakeholders as part of consultations on the revised concession agreement. Feedback from developers, lenders and infrastructure investors is expected to help refine the contractual provisions before bids are invited under the new framework.
The initiative reflects the government's broader effort to reinvigorate public-private partnerships in the highways sector after the success of EPC and HAM-based project delivery over the past decade. A stronger PPP pipeline is expected to diversify funding sources for road infrastructure while reducing dependence on public expenditure alone.
Once the revised Model Concession Agreement is finalised, the government is expected to begin inviting bids for selected highway projects under the new model. If successful, the toll-cum-annuity framework could become an important addition to India's highway development programme by improving project bankability, attracting institutional capital and supporting the next phase of national road expansion.
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