Saturday, October 31, 2020

Editor's Space

The TOT route

 

The shift to the TOT model is prompted by an urgent need by the government to ‘monetise’ its assets, to raise funding for its ambitious road construction programme Bharatmala.

 

“The timely monetisation of mature road assets will be a critical determining factor in plugging the shortfall in budgetary allocations and fetch requisite funding to support ambitious execution targets set for the Bharatmala programme, failing which the shortfall will have to be met through additional borrowings, thereby further increasing the debt with the NHAI,” says ICRA, adding, “In this context, success of the toll-operate-transfer (TOT) will be very significant.”

 

TOT is the new model developed for monetising operational national highway projects where investors make a lump sum payment in return for long-term toll collection rights backed by a sound tolling system.

 

Recently NHAI invited bids from private operators for the third bundle of TOT auctions, targeting a minimum `4,995 crore. Based on future cash flows and discount rates used to arrive at present value, the NHAI has estimated the concession value at roughly `8.8 crore/km compared with `9.15 crore in the first two iterations of road TOT, as per SBICap Securities report.

 

The report underlines how critical is success of TOT-3 as FY20 interim budget has earmarked `10,000 crore (~10% of NHAI’s planned FY20 outlay of `1.1 trillion) fund-raise through TOT monetization to fund the ambitious Bharatmala programme.

 

Last month Cube Mobility Investments, part of the Singapore based Cube Highways Group, has entered into financing agreements with State Bank of India (SBI) for availing the term loan facility of `3,500 crore towards the TOT-Bundle 3 projects. Cube Highways had been awarded TOT- Bundle 3 Projects, consisting of 9 road stretches with 2,265 lane kilometers across four states in India.

 

This is a crucial milestone of bagging TOT-Bundle 3 project reflects Cube Highways’ strong franchise in India and the robust nature of the projects.

 

The Toll Operate Transfer model developed by National Highways Authority of India (NHAI) uses a one-time, upfront concession. After experimenting with various hybrid models for revenue sharing between the govt (NHAI) and the constructor, the latest is the TOT model...i.e. toll-operate-transfer.

 

With a lot set to happen, this month is full of reading material and we are certain that you will have a wonderful read!

 

The shift to the TOT model is prompted by an urgent need by the government to ‘monetise’ its assets, to raise funding for its ambitious road construction programme Bharatmala.

 

“The timely monetisation of mature road assets will be a critical determining factor in plugging the shortfall in budgetary allocations and fetch requisite funding to support ambitious execution targets set for the Bharatmala programme, failing which the shortfall will have to be met through additional borrowings, thereby further increasing the debt with the NHAI,” says ICRA, adding, “In this context, success of the toll-operate-transfer (TOT) will be very significant.”

 

TOT is the new model developed for monetising operational national highway projects where investors make a lump sum payment in return for long-term toll collection rights backed by a sound tolling system.

 

Recently NHAI invited bids from private operators for the third bundle of TOT auctions, targeting a minimum `4,995 crore. Based on future cash flows and discount rates used to arrive at present value, the NHAI has estimated the concession value at roughly `8.8 crore/km compared with `9.15 crore in the first two iterations of road TOT, as per SBICap Securities report.

 

The report underlines how critical is success of TOT-3 as FY20 interim budget has earmarked `10,000 crore (~10% of NHAI’s planned FY20 outlay of `1.1 trillion) fund-raise through TOT monetization to fund the ambitious Bharatmala programme.

 

Last month Cube Mobility Investments, part of the Singapore based Cube Highways Group, has entered into financing agreements with State Bank of India (SBI) for availing the term loan facility of `3,500 crore towards the TOT-Bundle 3 projects. Cube Highways had been awarded TOT- Bundle 3 Projects, consisting of 9 road stretches with 2,265 lane kilometers across four states in India.

 

This is a crucial milestone of bagging TOT-Bundle 3 project reflects Cube Highways’ strong franchise in India and the robust nature of the projects.

 

The Toll Operate Transfer model developed by National Highways Authority of India (NHAI) uses a one-time, upfront concession. After experimenting with various hybrid models for revenue sharing between the govt (NHAI) and the constructor, the latest is the TOT model...i.e. toll-operate-transfer.

 

With a lot set to happen, this month is full of reading material and we are certain that you will have a wonderful read!

 




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