The Comptroller and Auditor General of India (CAG) released its audit report on the Rationalisation/ Deferment of Premium in Built Operate and Transfer (BOT) projects by the National Highways Authority of India (NHAI).59 Key observations and recommendations of CAG are as follows:
▪ BOT (Toll) mode of highway development: Under BOT (Toll) model, bidders of a project either quote viability gap funding (VGF) payable by NHAI or premium payable to NHAI during the construction/concession period. A concessionaire is a private partner who is responsible for financing, constructing, and operating a project during the specified concession period. In 2013, due to slowdown in the economy and to revive the road sector, NHAI proposed a scheme to defer the premium payable by concessionaries. Among the available alternatives, the scheme which was approved involved the rescheduling of premium for all stressed projects. NHAI deferred premium worth Rs 9,296 crore for 20 projects for over eight to 14 years.
▪ Scheme approved despite alternatives: CAG observed that concession agreements of all BOT projects contained provisions that allowed NHAI to grant relief to the concessionaires. NHAI cited problems faced by concessionaires which could have led to a loss of Rs 98,115 crore if the projects were terminated. CAG observed that the scheme for deferment of premium had a higher risk of being misused. It observed that providing deferment of eight to 14 years at one go was an undue favour and was detrimental to the financial interest of NHAI. CAG recommended that NHAI should follow existing provisions of concession agreements before proposing new schemes for concessions beyond contractual provisions.
▪ Post-tender amendments for concessionaires: The premium payable by the concessionaries was as per a legal contract which was drawn up after an open bidding process. The premium offered was the only parameter in deciding financial bids. CAG observed that any post-tender amendments amounted to vitiating the tendering process. It recommended NHAI to avoid such post tender amendments which are against the principle of sanctity of contracts.
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