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The transportation sector is an indispensable part of an economy such that a hitch could lead to standstill the economy. The Prime Minister’s recent announcements which are intended to stream-line multi-modal transport, emphasizes the importance of this sector.
India has the second largest road network and fourth largest railway network in the world. Maritime transport consists of around 95 percent of India’s trading by volume and 70 percent by value.
Owing to such crucial placement of transport sector in the functioning of our economy the Government has taken initiatives such as increase in Public-Private Partnership (PPP) models in roadways, railways infrastructure projects (‘Infrastructure’). Such PPP projects are based on the Build -Operate-Transfer (BOT) model where the private partner (referred to as ‘Concessionaire’) is contracted to build, operate and eventually, transfer the ownership of the infrastructure project.
A variant of the BOT model that is generally used in Design-Build-Finance-Operate-Transfer (DBFOT) where in addition to the functions mentioned in BOT the Concessionaire is required to design the project and either partially or completely finance the project.
BOT projects
Generally, a BOT projects have 3 key stages
1. Build – The Concessionaire designs and constructs the infrastructure. Generally, there is no payment made by the Government during this stage.
2. Operate – On completion of construction, the Concessionaire is provided rights to operate and maintain the infrastructure. Consideration is received by the Concessionaire either through collection of charges from the public for using the infrastructure or receipt of annuity from the Government. The period of this stage may vary from 20 to 30 years.
3. Transfer – After the operation period, the ownership and maintenance of the infrastructure is transferred to the Government.
Depending on the manner of disbursement of consideration to the Concessionaire, BOT projects may be further classified as follows:
BOT – Toll Model
BOT – Annuity Model
BOT – Hybrid Annuity Model
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