NHBF Demands BOT Annuity as Toll Tenders Draw Zero Bids

The National Highways Builders Federation (NHBF) has formally asked the Ministry of Road Transport and Highways (MoRTH) to shift upcoming tenders to the build-operate-transfer (BOT) annuity model, arguing the current BOT (toll) structure is becoming unfundable in its present form.

The trigger is not hypothetical. Recent BOT (toll) packages floated by the National Highways Authority of India (NHAI) drew no bids—a market verdict the federation, in an August 18 submission, attributes to an “unacceptably high” risk profile under the existing model concession agreement.

The risk split is the real battleground

Under BOT (toll), the concessionaire finances, builds, operates, and collects tolls directly, carrying full traffic and revenue risk. Under BOT (annuity), the authority pays fixed, regular amounts across the concession period, transferring demand risk back to the state.

NHBF’s demand is effectively a call to retain private financing and construction while moving demand risk off the developer’s balance sheet.

Three grievances are driving the standoff:

- “Unfair default classifications” when traffic underperforms
- Slow and costly dispute resolution
- Delay compensation that does not cover real construction and financing costs

Why lenders will not fund the current structure

The commercial logic matters more than the contractual language. Indian lenders have been reluctant to underwrite pure traffic risk since the 2011–2015 wave of aggressive BOT (toll) bids left stretched balance sheets and stalled assets.

The Hybrid Annuity Model (HAM) was introduced precisely to bridge that gap. NHBF’s annuity push signals the industry—and, implicitly, its banks—still will not accept demand risk at current bid levels.

For large toll-portfolio concessionaires such as IRB Infrastructure Developers and Ashoka Buildcon, the economics are direct: annuity payments preserve cash-flow certainty but surrender toll upside, while an unrevised BOT (toll) model risks leaving tenders unbiddable.

The fiscal trade-off for MoRTH

For MoRTH and NHAI, the cost is fiscal. BOT (toll) monetizes traffic risk and shifts capex off the public balance sheet; annuity obligations sit with the authority.

Accepting NHBF’s position preserves private construction and financing participation but concentrates revenue risk back with the state.

The real signal is not a single clause dispute. It is that the government’s ambition to revive asset-heavy, toll-backed private road projects is colliding with a private capital base that has repriced demand risk.

Until bankability—not just policy intent—is restored in the model concession agreement, zero-bid outcomes will remain the market’s clearest feedback.