The order inflow in the construction and infrastructure space in the coming years is likely to be driven by the engineering-procurement-construction (EPC) route owing to sheer lack of interest by bidders for the build-operate-transfer (BOT) mode, due to viability concerns, informed a report from IIFL.
“EPC (also known as cash contract) is the preferred mode currently as against BOT,” IIFL said.
While in the EPC space payments are made at regular intervals to the contractor by authorities like the National Highways Authority of India (NHAI), BOT requires investment to be made by contractors and later this is recovered through mechanisms like toll collections. Here the contractor is exposed to the risk of traffic and toll growth which is typically linked to the performance of the economy.
The report said, initially road projects had been awarded through the BOT route over the last few years. However, the experience had been bitter for the players due to volatile traffic in toll projects, public outcry against toll collections etc. These players now largely want to focus on the EPC model and some have or are looking to monetise their BOT assets, revealed the report.
Source: ISMW