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BOT from the blue: aggressive bidders for airports may not have been prudent, shows the experience with roads

The new per-passenger revenue model for airports puts the risk of traffic assumption and tariff fluctuation on the developer. A similar framework for highways, the build-operate-transfer model, has landed many road-sector companies in trouble.
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priyanka
12 Mar 2019 7 Mins Read 0 comment
Workers on a construction site at Indira Gandhi International Airport, New Delhi Getty Images
Workers on a construction site at Indira Gandhi International Airport, New Delhi
The public-private partnership (PPP) model in India is a cautionary tale for companies and government agencies of how joining hands is not always a good idea. In the past, infrastructure companies have burnt their fingers after bidding aggressively under the build-operate-transfer (BOT) model, assuming road assets would attract high traffic and, therefore, bring good returns. But bidding for projects
non-aero revenues, which can compensate the downside in aero revenues, he adds. Traffic and tariff risk, payment delays, and aggressive bidding make for a perfect recipe for disaster. Ask anyone in the road-asset development sector. Moreover, the existing model for airport privatisation was working just fine. Why fix something that isn’t broken? ( Graphics by Sadhana Saxena)
The public-private partnership (PPP) model in India is a cautionary tale for companies and government agencies of how joining hands is not always a good idea. In the past, infrastructure companies have burnt their fingers after bidding aggressively under the build-operate-transfer (BOT) model, assuming road assets would attract high traffic and, therefore, bring good returns. But bidding for projects non-aero revenues, which can compensate the downside in aero revenues, he adds. Traffic and tariff risk, payment delays, and aggressive bidding make for a perfect recipe for disaster. Ask anyone in the road-asset development sector. Moreover, the existing model for airport privatisation was working just fine. Why fix something that isn’t broken? ( Graphics by Sadhana Saxena)

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