A BOT contract (build, operate, transfer) is a deal in which a private concessionaire pays to build a road or other asset, runs it and collects toll for a fixed concession period, then hands it back to the government. On national highways the power comes from Section 8A of the National Highways Act, 1956. For a contractor or machine owner, the point is that NHAI is not your payer: your bills are met from the concessionaire’s equity, bank loans and, later, toll.

Twenty-five years. That was the concession on the Delhi to Rohtak stretch of NH-10, awarded on a BOT tender NHAI issued in December 2006. The concessionaire was to bear the entire cost and earn it back from toll. The road was due by May 2010. Toll began only in November 2015, on 87.77% of the stretch.

Most hire disputes on highway jobs start with a payment model the subcontractor never read. Here is how BOT works and what it means for your money.

What a BOT contract means

The three words are the three phases of the deal. The concessionaire first builds the project with its own equity and bank loans. It then operates and maintains it, collecting the user fee, which on a highway is the toll, for the concession period. At the end of that period it transfers the asset back to the government.

The concessionaire is usually a special purpose company formed only for the project. It signs a concession agreement with the authority, and it normally hires an EPC contractor to do the actual construction. That EPC contractor is the company most machine owners deal with, as our explainer on who an EPC contractor is and who actually hires your machine sets out.

The standard paperwork came from the erstwhile Planning Commission, which wrote the first Model Concession Agreement for highways in 2006 and later versions for BOT (Toll), BOT (Annuity) and OMT projects. That history is set out in the government’s own PIB release on the hybrid annuity model (27 January 2016).

The law behind a BOT toll

Section 8A of the National Highways Act, 1956 does three things. It lets the Central Government enter into an agreement with any person for the development and maintenance of all or part of a national highway. It entitles that person to collect and retain fees at rates the government notifies, set with regard to the building and maintenance cost, interest on capital, a reasonable return, the volume of traffic and the period of the agreement. And it gives that person powers to regulate traffic on the stretch under the Motor Vehicles Act.

The toll rate is not the concessionaire’s to choose. It is notified. What the concessionaire controls is cost and time, and time is where most BOT projects get into trouble.

BOT contract vs HAM vs EPC: who funds the road

Model Who funds construction How the private side gets its money back Who carries traffic risk
BOT (Toll) The concessionaire, from equity and loans Toll collected over the concession period The concessionaire
BOT (Annuity) The concessionaire Annuities from the authority after the project is commissioned Not the concessionaire; its income is the annuity
Hybrid annuity model Part authority, part concessionaire Payments during construction plus annuities after Not the concessionaire
EPC The authority, as a public-funded contract Running bills from the authority Not the contractor

The government’s 2016 release puts the difference plainly: under the hybrid annuity model the private partner bears construction and maintenance risk “as in BOT (Toll) projects”, bears financing risk only in part, and is insulated from traffic and inflation risk. Our guide to the hybrid annuity model and its payment milestones covers that model in full.

What the NH-10 case shows about BOT money

The Delhi High Court set out the NH-10 project’s history in West Haryana Highways Projects Pvt Ltd v. NHAI (7 October 2020). The concession agreement put the entire project cost on the concessionaire and gave it a 25-year concession from 2 May 2008, with the exclusive right to build, operate and maintain the highway and collect toll. Loan money and toll collections both went into a single escrow account run by the lead lender bank.

Toll could start only once NHAI issued a provisional or final completion certificate. The project, due by 1 May 2010, got its provisional certificate on 25 November 2015, for 87.77% of the length. The court noted that the concessionaire had spent about ₹900 crore and was receiving about ₹36 crore a year in toll. The lenders issued a notice of financial default in September 2019, and in May 2020 NHAI suspended the right to collect toll under the agreement’s suspension clause, which allows up to 180 days.

Every one of those years before toll was paid for from equity and loans. Any subcontractor or hire bill unpaid in that period was waiting on the same strained balance sheet.

If a BOT contract is terminated, who gets paid?

The concession agreement sets a termination payment, and it is narrow. In Bhubaneshwar Expressways Pvt Ltd v. NHAI (25 November 2019), the Delhi High Court quoted the BOT (Toll) agreement for the Bhubaneswar–Puri section of NH-203:

Reason for termination Termination payment by the authority
Concessionaire default during operation 90% of the debt due, less insurance cover
Concessionaire default before COD Nothing
Authority default The debt due plus 150% of the adjusted equity

The agreement defined the termination payment as restricted to the debt due and adjusted equity. That money is for the lenders and the promoters. Your hire bill is not in it. If a BOT project is terminated during construction because the concessionaire defaulted, nothing at all comes from the authority, and your claim sits against the EPC contractor or the concessionaire.

What to check before you take a hire order on a BOT project

  • Who is paying you? The name on your work order is your debtor. Is it the concessionaire, the EPC contractor, or a petty contractor below them?
  • Has the concessionaire achieved financial close? Until the loans are signed, the project runs on the promoter’s money alone.
  • Where is the project against its completion date? A stretch already earning toll has income. One still years from it does not.
  • How has this contractor paid other vendors on the same stretch? Ask other machine owners on site.
  • Your own terms: a billing cycle, a credit period, and the idle-day and stoppage clauses.

If you are a micro or small enterprise with Udyam registration, the MSMED Act’s payment limits can help when a bill stalls. The remedies are set out in our guide to recovering a contractor payment delay on government and EPC work.

The bottom line

On a BOT contract the government does not fund construction and does not pay you. The concessionaire builds with equity and loans and waits for toll, often for years. If the concession is terminated, the termination payment goes to lenders and equity. Know who signs your work order, check financial close and how far the project is from earning toll, and keep your billing cycle short.

When you are pricing a highway package or offering your machines to one, browse live highway tenders and project opportunities, compare motor grader models and prices for road work, and line up equipment finance that allows for a slower payment cycle.

Concession terms, toll rules and payment structures differ by project and change over time. The clauses quoted here are from the agreements described in the judgments named. Confirm the terms of your own project with the contractor, your lawyer or the authority before you commit machines or money.