At a time when the government is trying to revive private-funded highway building, an association of highway developers has asked the road transport and highways ministry to reconsider several provisions of the revised Build-Operate-Transfer (BOT) model.
In a letter addressed to Highways Secretary V Umashankar on Tuesday, the National Highways Builders Federation (NHBF) said that “certain fundamental issues relating to risk allocation, project viability, and financial sustainability still remain unresolved” with the revised model concession agreement (MCA), identifying 16 critical clauses requiring changes. The revised MCA was announced just nine days ago.
The chief concern of the highway developers’ body is related to the arbitration clause. In accordance with finance ministry guidelines, the revised MCA says that any disputes over Rs 10 crore will not go to arbitration but through a conciliation mechanism. The restriction, according to the letter, creates significant concern for investors and lenders in large-value, long-term contractual obligations.
The association has asked the government to remove the flat monetary restriction on arbitration and permit disputes to be resolved through an appropriate ad hoc or institutional arbitration framework to ensure an effective and time-bound resolution.
The ministry introduced this clause after the finance ministry issued guidelines to reduce arbitration in public procurement. Sector experts disagree on its applicability. “The guidelines are just that — they’re not binding. Railways still does arbitration,” a senior industry executive said.
At an industry event by FICCI in Delhi on Wednesday, Afcons Infrastructure Managing Director Paramsivan Srinivasan echoed the same concern to Union Minister Nitin Gadkari, saying that India cannot aspire to be the hub of arbitration but shy away from arbitration for its own contracts at the same time, claiming that it is a “big dichotomy”.
Separately, the federation has also asked the government to reconsider provisions on concessionaire default with respect to a drop in traffic on the highway stretch.
“Classifying a consecutive 20 per cent traffic drop as a Concessionaire Default leading to termination is a fundamental misallocation of risk. Systemic traffic falls are caused by macro-economic factors, competing networks, or policy shifts — factors entirely beyond the developer’s control,” the letter said.
It asked the ministry to reclassify severe traffic falls for two consecutive years as authority default instead. Termination payments must be calculated under Authority Default terms to safeguard Debt Due and Invested Equity, it said.
NHBF has claimed that without government intervention, there will be apprehensions among developers about participating in these contracts.
“We have been regularly representing these critical issues for your kind consideration. We humbly submit that without resolving these core concerns — particularly around unfair default classifications for traffic drops, dispute resolution, and real-cost delay compensations — there is a strong apprehension that upcoming tenders will continue to face zero-bid scenarios and a lack of private participation,” the letter said.
