Road projects to get ‘hybrid annuity model’ boost

The hybrid annuity model was conceived in the last financial year to bring back private participation in highway projects, which has dried up in the last few years.

Written by Sharmistha Mukherjee | New Delhi | Published: April 14, 2015 1:48 am

The government is looking at awarding 8,500 km of road development projects in the current financial year, nearly half of which would be executed under the new ‘hybrid annuity’ model.

The hybrid annuity model was conceived in the last financial year to bring back private participation in highway projects, which has dried up in the last few years.

Under this model, the government would provide 40 per cent of the project cost to the developer to start work. The remaining investment will have to be made by the contractor. The National Highways Authority of India (NHAI) will collect toll and refund the amount in installments over a period of 15-20 years, cutting down on upfront investment required to be made by the government.

Share This Article
Share
Related Article

A senior official in the ministry of road, transport and highways (MoRTH) said, “The objective of awarding projects under this model is two-fold. Since the traffic risk is not associated with the concessionaire it gives him some comfort level to lend from banks.

It also reduces the upfront investment the Centre needs to make in roads projects.

It is half-house aimed at bringing back private participation.”

This fiscal, around 4000 km of roads projects have been determined for award under this new model. Another 2000 km, is earmarked for award on BOT (Toll) basis; the remaining through the EPC (engineering, procurement, construction) route.

Last fiscal, the government awarded 7900 km of roads projects, more than double of the 3170 km awarded in 2013-14. However, only 700 km of these stretches will be executed in public- private partnership mode on Build, Operate, Transfer (BOT) basis. These projects will be completed over the next three years.

The road transport ministry has plans to award at least 8,500 km every year to meet the target of construction of 30 km highway per day in the next two years. At present, average daily construction is close to 12 km.

During UPA-II the record of award was much higher totalling about 20,000 km between 2010 and 2012. However, most of the projects did not take off due to unavailability of land, delay in forest and statutory clearances and economic slowdown.

When the NDA government came to power last year, work of stretches totalling 9000 km was held up. Till now 39 projects covering 4,700 km have been cancelled or letters of appointment for starting work have been withdrawn. Another 16 projects totaling around 1,360 km need fund infusion to start work.

For all the latest Business News, download Indian Express App

    Live Cricket Scores & Results