Centre targets slower highway expansion in FY27, revives BOT model

The government is likely to target construction of 10,000 km in FY27, unchanged from the previous fiscal year, when actual construction fell short at about 9,400 km. The target marks a step-down from the record 13,814 km set for FY24 and about 12,500 km for FY25. Actual construction in those two years stood at 12,349 km and 10,660 km, respectively, according to data from the Ministry of Road Transport and Highways.

Road transport and highways secretary V Umashankar told Mint the FY27 construction target would remain under pressure because of delayed projects awaiting resolution. “But, we are confident that awards would meet the target of 10,000 km in FY27 due to a pipeline of appraised projects with the ministry that would be put up for awarding quickly.”

While construction remained below target, highway awards stood at about 7,000 km in FY26. A backlog of projects, coupled with delays in statutory clearances and land acquisition, has slowed execution of greenfield and brownfield highway projects.

Umashankar said the ministry expects about 2,500 km, or a quarter of planned highway awards this fiscal, to be bid out under the BOT model. The projects are estimated to be worth more than ₹1 trillion.

“As BOT toll projects require a large amount of equity from developers (almost double of what is needed for HAM projects), the government should consider removing the limit on the grant amount that can be sought as a part of the bid for getting a good interest from investors. This will ensure that projects which are considered high risk by developers are also successfully bid out, albeit at a higher grant amount,” said Kuljit Singh, partner and national infrastructure leader, EY India.

BOT projects dominated highway construction awards between FY07 and FY14 and accounted for 96% of all projects awarded in FY12. But the model gradually fell out of favour as investor appetite weakened and several developers ran into liquidity stress after winning projects through aggressive bidding.

No projects were awarded under the BOT model in FY19 and FY20. Before the award of the Nashik-Solapur-Akkalkot project in December 2025, the National Highways Authority of India's (NHAI) previous attempt to award BOT projects was in 2020, though the project was eventually awarded only in FY21. NHAI could not award any BOT projects in FY24 and FY25.

Umashankar said a new investor-friendly model concession agreement (MCA) for BOT toll projects is almost ready and would be notified soon before bids are invited.

The revised MCA, expected later this month, may include clearer provisions on termination payments, traffic-risk sharing, change-in-law protections and dispute resolution—areas that had deterred private participation during the previous BOT cycle.

It will also, for the first time, allow private equity firms and large fund houses to directly bid for greenfield highway construction contracts instead of participating only in operational, revenue-generating assets.

The road and highways ministry is also streamlining the “Harmonious Substitution” clause in the proposed BOT toll MCA to prevent misuse. Changes to this clause are among the reasons for the delay in announcing the revised MCA.

Harmonious substitution allows lenders to replace a defaulting concessionaire with a new entity without terminating the original concession agreement.

Umashankar said the large pipeline of appraised and under-construction projects, including backlog projects with government agencies, would keep construction activity close to recent levels despite the lower target.

“We want to clear backlog up to 90% by the end of this fiscal. We started with 154 projects that were delayed by over three years as on March 2024 and targeted to bring it down to 60 by the end of March 2026, but ended the year with 80 delayed projects,” Umashankar said, adding that the aim is to bring down the number of delayed projects to 25 in FY27.