Venture capital and pension funds can now participate in highway PPP projects

The government has allowed venture capital, private equity, infrastructure and pension funds to bid for highway projects under the Public-Private Partnership (PPP) model, marking a major shift in policy since the sector was opened to private participation in the early 2000s. Until now, only highway developers and construction firms were permitted to participate in such bids, reported TOI.

As part of efforts to attract larger private investments into the road sector, the road transport ministry has revised bidding norms for Build-Operate-Transfer (BOT) toll projects. Officials told TOI that Alternative Investment Funds (AIFs) and Foreign Investment Funds (FIFs), backed by significant financial resources, are expected to bring stronger project execution capabilities while also ensuring better returns from highway assets.

These entities typically have access to long-term capital through pension and infrastructure funds. However, the extent of investor interest and the structure of future deals remain to be seen.


According to the TOI report, the revised bidding document issued by the highways ministry, said, “Bidder may be a natural person, private entity, govt-owned entity, AIF, FIF or any combination of them with a formal intent to enter into a joint bidding agreement to form a consortium.” Traditional highway developers and construction companies will continue to remain eligible for bidding.

The updated framework also introduces separate evaluation criteria for alternative funds and conventional highway developers. While construction firms will continue to be assessed on both technical expertise and financial strength, AIFs and FIFs will be evaluated solely on financial capacity. For these funds, the financial eligibility threshold has been fixed at twice the prescribed level.

Explaining the rationale behind the move, an official said the role of a concessionaire in BOT projects is primarily to arrange finances, appoint capable contractors and efficiently manage highway assets.

“The concept of a concessionaire in BOT projects is ideally that of an entity capable of arranging finances, appointing construction firms for execution, and managing highway stretches efficiently. It is similar to filmmaking — a producer arranges funding and brings together the right director and actors to create a successful film. This change in norms will bring a major shift and attract quality investment into the sector,” the official said.

To ensure project quality, alternative funds will be required to submit the credentials of their proposed contractors for approval. The selected contractors must satisfy the qualification requirements laid down in the bidding document.

(with TOI inputs)