NHAI cancels two projects on low bids

The National Highways Authority of India (NHAI) has decided to cancel the sixth and eighth bundles of its asset monetisation plan via the toll-operate-transfer (TOT) mechanism, as the bids for the assets on offer fell short of expectations, sources said.

Sekura Roads submitted the highest Rs 1,107 crore bid for the sixth TOT bundle that includes a 32.8-km, four-lane Agra bypass and the 75.3 km four-lane Shivpuri-Jhansi stretch on NH7, located in Uttar Pradesh and Madhya Pradesh. Path Highways placed the highest Rs 1,314-crore bid for the eighth bundle, consisting of the 138-km Rewadi Khela to Kelapur stretch on NH7 in Maharashtra. The financial bids for the two bundles were opened on March 15.

Under the TOT model, public-funded highway stretches are given on long-term lease against upfront payment. The operator recoups investment through collection of user fee on the stretches following the prescribed rates by the NHAI; but the operator has to operate and maintain the stretches during the entire concession period, which was 20 years for the two bundles.

The NHAI has been monetising highway stretches since 2018. It made five attempts of monetisation through the TOT route before the ongoing lot tasted success in three of them, but cancelled the other two as bidders did not match up the floor price set by the authority.

From the fifth bundle onwards, the government decided not to disclose the reserve price for the TOT bundles at the time of inviting bids, leaving it to the market to discover the price.

It was also decided that the reserve price would be announced after opening the financial bids.

Sources said the reserve price for the two bundles was at least 10% higher and as such, it has been decided to either rebid or re-bundle the stretches.

“This shows NHAI’s high confidence on the sustained robustness and uptick in traffic numbers witnessed in the recent past,” said ICRA’s Rajeshwar Burla.

The upfront money that the authority gets from monetisation is used to lay newer highway stretches and retire debt that mounted to `3.38 trillion till November last year.

NHAI plans to monetise 5,500 km stretches in 2022-23, 7,300 km in 2023-24 and 8,900 km in 2024-25. The mode of monetisation and expected upfront realisation amount is determined on the basis of project viability and market appetite prevalent at the time of bidding.