Adani emerges highest bidder in toll-operate-transfer road auctions

Adani Enterprises has emerged as the highest bidder for both bundles of the national road developer’s latest toll road auctions.

The financial bids for the tranche five of the National Highways Authority of India’s (NHAI's) toll-operate-transfer (TOT) auction were opened on Tuesday. Cube Highways, DP Jain, Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), IRB Infra and Prakash Asphaltings and Toll Highways (India) Ltd. were the other bidders. 

NHAI had put up two road assets on sale at the end of September under the latest round of the toll-operate-transfer mechanism. Both toll roads are located in Gujarat. The first bundle size is 53.6km and the second is 105km. In a departure from precedent, NHAI did not set a reserve price to the newest round of TOT auctions for government-owned roads. This move came after the highest bids were below the base price in the second and fourth round of auctions and investors are hesitant to commit large amounts of capital to public infrastructure in the midst of covid-related uncertainty. The concession periods have also been shortened from 30 years to 20 years.

Under the TOT model, long-term concessions for collecting toll revenues from national highways are auctioned to the highest bidder. The TOT model was introduced in 2016 to monetize publicly-funded highways, where investors could make a one-time lump sum payment in return for toll collection rights for 30 years.

The NHAI, the nodal agency of the ministry of road transport and highways, has so far successfully completed two rounds of such auctions since the programme was launched and had to withdraw two others after the bids came below the reserve price.

The Covid-19 pandemic and the resultant nationwide lockdown have hit NHAI plans to monetize its roads portfolio. NHAI had hoped to raise Rs.34,000 crore through TOT monetization over FY19-FY22, and Rs.1.06 trillion through private sector participation. With budgetary allocation in the last two budgets towards the roads ministry lower than required, NHAI is forced to depend on alternative funding avenues, such as TOT, to keep the government’s roads construction programme on track.