The toll, operate and transfer (TOT) model, an asset recycling model which enables completed road projects to be monetised, is now being initiated at the State level in India. While the Ministry of Road Transport & Highways (MoRTH) and the National Highways Authority of India (NHAI) are expecting bids for the first TOT bundle of National Highways in February 2018, Telangana state has become the first state to kick-off the asset monetisation exercise.

This is the first TOT initiative being undertaken by a state, and would set the pace for asset recycling as recommended by the Kelkar Committee on public-private partnerships. It is also a credible way to raise extra-budgetary resources. Hyderabad Growth Corridor Ltd. (HGCL) has recently started the process to monetise the Nehru Outer Ring Road (NORR) in Hyderabad under this model, and appointed a consortium of LEA Associates South Asia Pvt Ltd (LASA) and CRISIL Risk & Infrastructure Solutions Ltd (CRIS) to support as Transaction Advisors. The project is expected to garner significant extra-budgetary resources for Telangana that can be used for other infrastructure assets. There is no additional cost to users or taxpayers.

Says Jagannarayan Padmanabhan, Practice Lead and Director, Transport & Logistics, CRIS, “TOT is an effective asset recycling model, enabling governments to raise resources for investment in infrastructure without resorting to budgetary support or debt. The NORR TOT project will be watched closely, as it will show other states the way forward on asset recycling. CRIS looks forward to supporting this first state-level TOT project.”

The 158 km-long NORR was constructed in three phases at a cost of Rs 6,696 crore, and comprises 13 road stretches – dotted with 19 toll plazas – that would be monetised. HGCL envisions adding value to NORR through private sector participation that would upgrade the asset on a continuous basis while efficiently taking care of its O&M needs.

The project is expected to generate significant interest among investors – both Indian and international, including sovereign wealth funds, infrastructure investment funds and road developers – due to its location, minimum risks of construction, land acquisition, environmental clearances, and known traffic flow for the past few years.

Says Avadesh Singh, Project Team Leader of LASA, “A large number of traffic and engineering surveys will be carried out to give the investor community comfort regarding the condition of the highway, and base- and horizon-year traffic levels. Data will be provided to bidders through a virtual data room to afford better bid transparency. This is a unique project where the O&M stipulations need to be designed in terms of performance standards, service levels and maintenance intervention regime.”