The highway developers association has appealed to the Ministry of Road Transport and Highways to review several provisions in the updated Build-Operate-Transfer (BOT) model, as unresolved issues could reduce private participation in road construction.
In a letter addressed to the Secretary of Highways in Umashankar on Tuesday, the National Federation of Highway Builders (NHBF) indicated that 'some fundamental issues concerning risk allocation, project viability, and financial sustainability' remain unresolved in the revised Memorandum of Concession Agreement (MCA), highlighting 16 critical points requiring changes. This revised MCA was presented just nine days ago.
The association's main concern relates to the arbitration clause. According to the Ministry of Finance guidelines, the revised MCA stipulates that any disputes exceeding 10 crore rupees will not be referred to arbitration but will be resolved through a conciliation mechanism. This provision, according to the letter, causes serious alarm among investors and creditors involved in large-scale long-term contractual obligations.
The association demanded that the government eliminate the fixed monetary limit on arbitration and allow dispute resolution through an appropriate ad hoc or institutional arbitration structure to ensure effective and timely resolution.
The Ministry implemented this provision after the Ministry of Finance issued directives aimed at reducing the number of arbitrations in public procurement. However, industry experts are divided on the applicability of this rule. One senior industry leader noted: 'These directives are just that—they are not mandatory. Railways still use arbitration.'
During an industry event organized by FICCI in Delhi on Wednesday, Afcons Infrastructure Managing Director Parasmivan Srinivasan expressed similar concerns to Union Minister Nitin Gadkari. He stated that India cannot aim to become an arbitration hub while simultaneously avoiding it in its own contracts, calling it a 'big dichotomy.'
Furthermore, the federation asked the government to review the provisions regarding concessionaire default due to traffic decline on a highway section. The letter argued: 'Classifying a sequential drop in traffic by 20 percent as a concessionaire default leading to termination is a fundamentally incorrect risk allocation. Systemic traffic declines are caused by macroeconomic factors, competing networks, or policy changes—factors entirely outside the developer's control.'
It was requested that the ministry reclassify a sharp decline in traffic over two consecutive years as a governmental authority default. It was emphasized that termination payments should be calculated based on the governmental authority default conditions to protect debt and invested capital.
NHBF stated that without government intervention, developers would have concerns about participating in such contracts. The letter concluded: 'We regularly present these critical issues for your consideration. We humbly state that without resolving these core problems—especially regarding the unfair classification of traffic drops, dispute resolution, and compensation for delays at real cost—there is a strong fear that upcoming tenders will continue to face scenarios of zero bids and lack of private participation.'