Gone are the days of government rolling out grants to woo private players to take up highway projects.
In a reversal from earlier trend where government was giving grants (in the form of viability gap funding), developers now find highway projects so lucrative that they are offering hefty premium for them.
In the last five days alone, the National Highway Authority of India has received annual premium of Rs 939 crore from bidding six highway projects.
Based on net present value, the premium, which will increase by 5% every year (as per the contract), will fetch
the government Rs 15,000 crore over the concession period, which varies between 20-30 years.
On Tuesday, Essel Infraprojects Limited outbidded 15 firms by offering an annual premium of Rs 66 crore for 30 years to bag the Rs 1,055 crore project involving four-laning of the 125-km Shivpuri-Gwalior stretch.
NHAI was expecting to give a 31% grant for the project.
On Monday, GVK Transportation Private Limited outbidded 14 firms to bag a Rs 2,815 crore highway project in Madhya Pradesh.
NHAI will get an annual premium of Rs 181 crore for 30 years when earlier it was expecting to give a 15% grant.
In some cases, the income from the premium over the entire duration of the concession period is more than the total cost of the project.
NHAI has already earned Rs 1,700 crore as premium from awarding projects this year.
“We are hoping to get Rs 2,500 crore as premium by year end when some more big ticket projects go off the shelf,” said a NHAI official.