Build-operate-transfer (BOT) model


    In News 

    The National Highways Authority of India (NHAI) is set to return to funding through private investments and plans to offer at least two highway upgradation projects to private players using the build-operate-transfer (BOT) model during the current quarter.

    About Build-operate-transfer (BOT) model

    • It refers to the initial concession by a public entity such as a local government to a private firm to both build and operate the project in question. 
      • After a set time frame, typically two or three decades, control over the project is returned to the public entity.
    • Under the BOT model, a private player is granted a concession to finance, build and operate a project for a specified period of time (20 or 30 year concession period), with the developer recouping the investments by way of user charges or tolls charged from customers using the facility, and thereby taking on a certain amount of financial risk.
    • The BOT (toll) model was the preferred model for road projects, accounting for 96% of all projects awarded in 2011-12
      • But this progressively reduced to nil. When the interest in BOT projects started to wane, road construction shifted to the traditional engineering, procurement and construction (EPC) mode, with the HAM model being devised later. 
        • Under the EPC model, the government pays the entire cost, thereby insulating the contractor entirely from financial risk.