A concession agreement is a contract between the National Highways Authority of India (NHAI) and a private company for the development, operation and maintenance of a national highway project. The agreement specifies the terms and conditions for the concessionaire to invest in the project and collect revenue from it.
The concession agreement is a crucial step in the development of highways in India as it enables NHAI to leverage private sector investment and expertise to accelerate road building and maintenance, while providing the private sector with a stable and predictable regulatory environment and revenue source.
A concession agreement typically includes several provisions, such as investment requirements, financial obligations, timelines for construction and operation, revenue sharing mechanisms, and dispute resolution procedures. The agreement also includes provisions related to compliance with environmental and social norms.
One of the key features of a concession agreement is the revenue sharing mechanism. Generally, the concessionaire is allowed to collect toll from road users for a certain period of time, during which it must recover its investments and earn a reasonable return on investment. Once this period ends, the highway is transferred to NHAI, which can then operate it or award it to another concessionaire through a competitive bidding process.
Another important feature of a concession agreement is the risk allocation mechanism. The concessionaire is typically responsible for financing, designing, building, operating and maintaining the highway, while NHAI is responsible for providing land and all necessary clearances, approvals and permits. The agreement specifies the risks and liabilities of both parties, and outlines the procedures for managing and mitigating risks such as force majeure events, unforeseeable circumstances, delays and cost overruns.
The concession agreement also includes provisions related to performance monitoring and evaluation. The concessionaire is required to meet certain service quality standards, such as minimum levels of safety, maintenance and traffic flow, and is subject to regular audits and inspections by NHAI. The agreement also specifies penalties for non-compliance and incentives for exceeding performance targets.
In summary, a concession agreement is a comprehensive legal document that outlines the terms and conditions for the development, operation and maintenance of a national highway project. It provides a framework for private sector participation, risk allocation, revenue sharing, compliance and performance monitoring, and helps to accelerate road building and maintenance in India. As such, it is a key tool in NHAI`s efforts to achieve its ambitious targets of building high-quality highways across the country.
