After a long pause, the Centre has signalled a comeback of BoT (toll) projects to attract long-term private capital and diversify how highway work is awarded.
Mint explains why this model is being brought back, what it offers, and what has changed this time.
What exactly is a BoT highway project?
A BoT model of highway concession lets a private firm arrange design, financing, construction, and operation of a tolled road. The concessionaire recovers its investment from toll collections over the concession period; at the end of that period the road is transferred back to the authority, the National Highway Authority of India (NHAI).
The model shifts traffic-risk and financing risk to the private partner while keeping ownership ultimately public. The model works towards rewarding investors with good returns while unlocking government funds for more essential work, particularly to better upkeep and maintenance of roads and ensuring safe travel on highways.
Why is the government reviving BoT now?
Three reasons stand out:
Mobilising private capital: BoT allows big-ticket greenfield projects to be financed without immediate government spending.
Balancing contract models: EPC (engineering, procurement and construction) and HAM (hybrid annuity model) have dominated since 2014, but projects with viable toll potential are now being targeted for BoT.
Policy fixes: Changes to the Model Concession Agreement (MCA) are designed to address past sources of disputes and make contracts more bankable.
Government and NHAI targets signal a push to raise the share of BoT projects in total highway awards within the next two to three years.
“HAM and EPC projects result in significant outflow from the government. BOT projects need to be revived as they result in the entire capex being borne by the private operator, thereby freeing up government resources for other projects,” said Kuljit Singh, Partner and National Leader–Infrastructure, EY India.
What advantages and drawbacks does BoT hold for the government?
The biggest advantage of BoT (toll) projects is that they ease the government’s immediate budget burden by shifting financing and traffic risks to private developers. If investor sentiment stays supportive, competition for such projects can fast-track highway delivery and raise construction quality.
But BoT projects come with challenges. Over-optimistic traffic forecasts often lead to weak returns, sparking disputes when contracts lack clear compensation mechanisms. They can also run into political pushback, with demands to suspend tolls for public relief. Robust monitoring and stronger concession terms are therefore critical. In this regard, the recent push includes MCA (concession agreement) tweaks intended to lower litigation risk while making these projects attractive for investors.
What’s in it for developers and financiers?
For developers, BoT projects can offer higher returns when toll prospects are strong, along with steady, annuity-style cash flows once traffic stabilises. They also gain control of operations for the concession period, creating long-term value.
For financiers, the long tenors of BoT concessions align well with infrastructure debt structures. However, lenders now insist on conservative traffic forecasts, adequate sponsor equity, and stronger contract terms to avoid the stress that plagued earlier projects.
What went wrong with BoT after 2014?
The model collapsed due to a mix of overambitious bidding, weak traffic projections, land acquisition delays, and cost overruns. Developers and lenders were left nursing losses, leading to litigation and stalled projects.
To de-risk the model, the government shifted to HAM and EPC, where the state absorbed more traffic and market risk.
The decline was sharp: BoT accounted for 96% of highway awards in 2011–12 but fell to almost nothing by 2018–20, when no new projects were awarded under this route. Even after a small revival attempt in 2020–21, only a couple of BoT projects have been awarded in FY24 and FY25.
What’s different in the new BoT contracts?
The Ministry of Road Transport and Highways (MoRTH) is preparing a revised MCA to revive investor interest in BoT (toll) projects. The draft aims to make contracts more flexible and bankable.
Key changes include:
Early exit option: Concessionaires can sell back projects to the government before the end of the term, freeing capital for new investments.
Risk-sharing tweaks: Compensation and concession extensions will be allowed if traffic falls short due to competing highways or other unforeseen factors.
Stronger lender protections: Clearer rules for project termination, including full settlement of non-recourse loans, to reduce litigation risk.
Substitution clause: The Centre, like lenders, can replace a defaulting concessionaire while safeguarding investor and lender exposure.
“With several high-speed expressways being developed parallel to the existing highway network, this step will help address both traffic and toll revenue risks. It is a timely and strategic move that will further strengthen investor confidence in PPP road projects in India,” said Harikishan K. Reddy, executive chairman, Cube Highways and Transportation Advisors Pvt. Ltd.
What’s the pipeline?
NHAI has lined up 53 projects worth ₹2.1 trillion to be developed under the BoT (toll) model, with awards expected to begin in phases this year. Another 100 road stretches are being evaluated for BoT awards.
Going forward, MoRTH plans to prioritise BoT for all projects with strong traffic potential. Other models—like EPC or HAM—will be used only when toll-based concessions are unviable.
By FY26, NHAI expects BoT’s share in overall highway awards to rise to 10%, signalling a strategic push to bring private capital back into long-term highway building.
