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A study by CRISIL Research estimates that toll road projects that were awarded on build-operate-transfer (BOT) basis, before 2009, could earn an average equity return of 22 per cent-developers, typically, target a return of 16-18 per cent while bidding.

In most of the 23 BOT toll road projects considered in this study, fewer bids per project kept bid amounts modest, while higher than expected growth in traffic boosted toll revenues.

But aggressive bidding, which is driving up developers' costs, could take a toll on newer projects, awarded after 2010-11. In most bids for the newer projects, developers have been offering a premium-a committed annual payment to the government over the term of the project. By contrast, for most of the earlier projects, the NHAI used to provide grants to road developers to make projects viable. In 2011-12 almost 65 per cent of the projects were awarded on premium basis, compared with 25 per cent in 2008-09. The premium amounts even exceeded the project cost in some NHDP Phase III and V projects, for which bidding was particularly aggressive.

CRISIL Research expects the sharp increase in developers' costs, due to the high premium amounts, to bring down the average equity returns of the newer projects to about 14 per cent.If you want to know more about PPP road projects in tender stage, visit Tenders in Asia Pacific.