National Highways Authority Of India (NHAI): Functions & Concession Agreements

National Highways Authority of India was set up by an act of the Parliament, NHAI Act, 1988 ‘An Act to provide for the constitution of an Authority for the development, maintenance and management of national highways and for matter connected therewith or incidental thereto’.

It has been entrusted with National Highways Development Project, which along with other minor projects, has vested in it 50329 kms of National Highways for development, maintenance and management.

NHAI objective is to ensure that all contract awards and procurements conform to the best industry practices with regard to transparency of process, adoption of bid criteria to ensure healthy competition in award of contracts, implementation of projects conform to best quality requirements and the highway system is maintained to ensure best user comfort and convenience.

The object of this article is to put a light on the functions of the National Highways Authority of India (NHAI) as well as to know about the concession agreements entered by the Government of India in relation to National Highway projects.

Functions of the National Highways Authority of India (NHAI):

The main function of the National Highways Authority of India (NHAI) is to develop, maintain and manage the national highways and any other highways vested in, or entrusted to, it by the Government of India.

The Authority, for the discharge of its functions do‑

  • Survey, develop, maintain, inspect and manage entrusted highways projects by GOI
  • Construct residential buildings and townships for its employees
  • Construct offices or workshops and establish and maintain hotels, motels, restaurants and rest-rooms at or near the highways vested in, or entrusted to it
  • Regulate and control the plying of vehicles on the highways for the proper management thereof
  • Develop and provide consultancy and construction services in India and abroad
  • Carry on research activities in relation to the development, maintenance and management of highways or any facilities thereat
  • Provide such facilities and amenities for the users of the highways vested in, or entrusted to, it as are, in the opinion of the Authority, necessary for the smooth flow of traffic on such highways
  • Form one or more companies under the Companies Act, 2013 to further the efficient discharge of the functions imposed on it by this Act
  • Advise the Central Government on matters relating to highways

Additionally, NHAI enters into Concession Agreements. Authority does agreements for design, construction, operation and maintenance of highways by DBFOT Concessionaires. The Concessionaire builds NH stretches and during operation and maintenance of the said stretch collects and retains the toll (user fee). In case of stretches developed on Govt. / NHAI Funds, NHAI engages OMT Concessionaire / User-Fee Collection Contractors.

Design-Build-Finance-Operate-Transfer (DBFOT) is a project delivery method which involves Designing and Building the infrastructure, operating them for a specific time period and Transferring the ownership of the project to the Government after specific time frame.

In Detail: A concession agreement is a contract that gives a company the right to operate a specific business within a government’s jurisdiction or on another firm’s property, subject to particular terms.

In General: Under concession contract, private partner (Company) gets exclusive rights from the government to operate, maintain and sometimes even carry out investment in a public utility for a given period of time. In return, the private party pays either a fixed sum, a percentage of revenue from the utility or a combination of the two to the government for exclusive rights over a facility.

The agreement grants the concessionaire exclusive rights to operate their business in the facility for a stated time and under specified conditions. Concession agreements span various industries and come in many sizes. They include mining concessions valued in the hundreds of millions of dollars, as well as small food and beverage concessions in a local movie theater.

Regardless of the type of concession, the concessionaire usually has to pay the party that grants it the concession fees. These fees and the rules under which they may change are generally described in great detail in the contract. Optimization of the concession contract implies the use of specific techniques to determine the most cost-effective and efficient solution for the design of concession contracts.

“Every problem is a gift-without problems we would not grow.”–Anthony Robbins


DISCLAIMER: Views expressed are that of the author based on the information/data as on the date of compilation by author for general informational use of the reader and should not be basis for action. For any actions expert opinion must be sought separately, author shan’t be liable for any actions/omission opinions framed by the user on the basis of this article in any circumstances.

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April 2021