Build–operate–transfer (BOT) schemes have large risks but can be successful in high-traffic sections. The BOT annuity concessionaire for the Orai-Baran section, with higher traffic than expected, represents a successful case. However, in many cases BOT schemes in India are not successful. BOT concessionaires need to take large risks as (i) lack of achievement of expected traffic volumes owing to external factors such as the unexpected opening of competitive roads and construction delay in adjacent sections, and (ii) delays in land acquisition. There is also a risk that competitive tendering may excessively lower bidding prices to such a degree that the contractor cannot perform satisfactory service sustainably. Although the BOT annuity scheme is considered to have less risk than the BOT toll scheme, the existence of growing numbers of unsuccessful BOT projects in India has made financiers more prudent in financing BOT projects. Given this situation, the NHAI has introduced an engineering procurement and construction scheme to reduce contractors’ risks by increasing bidders’ participation in road projects. Under the engineering procurement and construction, contractors carry out the detailed engineering design of the project, procure all the equipment and materials, and construct roads. It is like a turnkey project, and the NHAI makes milestone payments. The government is continuously reviewing and updating the policy, legislative, and administrative framework for PSP on the basis of experiences and lessons learned. The IEM noted that various PPP schemes have pros and cons and that the selection of PPP schemes is largely affected by the potential profitability of road sections.
National Highway Corridor (Sector) I Project