Developers Should Bid Prudently for BOT Projects: Giridhar Aramane

The government is attempting to make the BOT (Build-Own-Transfer) model of private investment in road projects financially viable, according to Transport Secretary Giridhar Aramane, but it will also require bidders to be prudent and not bid too low.

The developer arranges the funds for the project, collects tolls for the agreed-upon concession period, and then transfers the asset to the government under BOT. While there is renewed interest in the BOT model for roads, the government is taking precautions to avoid the aggressive bidding that caused so much stress previously.

"We are planning to award a few BOT projects in the current financial year. We keep testing the market and every quarter we would like to do at least two," Aramane told ET, adding that there is a plan to auction three road projects under BOT in the second quarter of FY23.
Aramane believes that both developers and lenders should talk about this type of private investment in roads, noting that overly optimistic bidding leads to arbitration and legal issues when projects don't produce the expected returns.

"If the bid value goes below 50% of the intrinsic value of a road project, then it is not feasible for the government to award the tender," he said, cautioning road developers that there needs to be a responsible approach towards BOT projects.