INTRODUCTION

Highway sector is one of the infrastructure sectors in India where the government have established the required enabling framework to attract private sector participation through PPP route. The Government of India paved the way for private sector participation with the amendment of National Highway Act, 1956. This Act enables private investors to levy toll and allow participation in construction, maintenance, and operation of National Highways. In addition to this, various key sector specific institutional, fiscal, and policy initiatives have been introduced, which include:

• 100% tax exemption for 5 years and 30% relief for next 5 years, which may be availed in 20 years.
  
• Capital grant up to 40% of the project cost to enhance viability of the project on a case to case basis.
  
• Duty free import of specified modern high capacity equipment for highway construction.
  
• Model concession agreements for projects costing less than INR 1 billion (approximately US$ 20 million) and for projects costing more than INR 1 billion (approximately US$ 20 million) in order to ensure uniformity in the various agreements for PPP road projects.

The Government of India formally launched the ambitious National Highways Development Programme to augment the capacity of the national highways network. National highways though comprise about 2% of the total road length in India but it carries more than 40% of the traffic. The components of National Highways Development Programme include the following phases:

• Phase I: Golden Quadrilateral (connecting the four metros, i.e. New Delhi, Kolkata, Chennai, and Mumbai)
  
• Phase II: North-South and East-West Corridors connecting the four extreme points of the country.
  
• Phase III: Up-gradation of 12,109 kms of highways into four lanes. This phase include the National Highways with high-density traffic providing connectivity to the state capitals and centres of economic importance.
  
• Phase IV: Two laning of highways which were not part of the NHDP phases I, II, and III.
  
• Phase V: Six laning of selected stretches of National Highways
  
• Phase VI: Development of 1000 km of expressways.
  
• Phase VII: Improvement through construction of ring roads, bypasses, grade separators, and service roads.

PPPs have been selected by the government as one of the preferred routes for development of the National Highways. Various models of PPP have been opted by the government for involving private sector participation. Amongst them, Build-Operate-Transfer (Toll) and Build-Operate-Transfer (Annuity) are the widely adopted models. The following sections discuss these models from risk management perspective.