BOT (ANNUITY) MODEL

BOT (Annuity) model is a traffic risk-neutral PPP model. In this variant of PPP model, the granting authority will pay to the concessionaire a fixed semi-annual annuity. This amount will compensate for the expenses incurred by the concessionaire in construction, operation and maintenance of the facilities, and the returns thereon. This amount does not bear any relationship with the level of traffic using the facilities; hence the concessionaire does not bear the traffic revenue risk. In addition to this, private investors are not exposed to development risks associated with conventional BOT development process, which is a very expensive and time consuming process.

In this PPP model, the concessionaire assumes risks relating to construction, technical, operation, and maintenance, while the other critical risks relating to land acquisition, permit/approval, traffic risk, and toll collection risk are allocated to the granting authority. The indicative risk allocation matrix for BOT (Annuity) projects is presented in Table 3.

Table: 3 Indicative Risk Allocation Matrix of BOT (Annuity) Projects

BOT MODELS - APPLICABILITY

The current policy framework for procurement of road projects through the PPP route is to first offer the highway project on BOT (Toll). If due diligence indicates the project to be unviable on BOT (Toll) in the first instance itself, then it should be offered on BOT (Annuity) basis.

The BOT (Toll) model is predominantly adopted for those stretches of the National Highways network with high/medium traffic density, which is financially viable. In certain stretches where there is a large number of commercial vehicles and a perceived low level of traffic revenue risk, the concessionaire has even agreed to share the revenue with the government. On the other hand, in those stretches where there is a perceived lack of users' willingness to pay toll and the private sector is reluctant to assume traffic revenue risk, the BOT (Annuity) model is used in those projects.