HAM model attracts Malaysian developershttps://indianexpress.com/article/india/india-others/ham-model-attracts-malaysian-developers/

HAM model attracts Malaysian developers

The government kicked off efforts to woo Malaysian contractors, who have been among the earliest investors in the roads sector in India, with a roadshow in Kuala Lumpur, earlier in April this year.

Road development projects, hybrid annuity model, National Highways Authority of India, NHAI, Indian highway development projects, Delhi-Meerut Expressway, Indian road infrastructure, road infrastructure development projects, highway development projects, CCEA, National Highways Authority of India, NHAI, Indian express, nation news, india news, business news
Malaysian companies had substantially invested in the Golden Quadrilateral programme under Phase — I of the National Highways Development Project (NHDP).

In what can be seen as early indications of revival of foreign participation in Indian highway development projects, Malaysian contractors have expressed interest in developing the Delhi-Meerut Expressway (DME), the first project which has been identified by the government to be bid out on the its newly conceived hybrid annuity model (HAM).

“We are rolling out the new hybrid annuity model for awarding the contract for developing the Delhi-Meerut Expressway. This model has been designed to give comfort to the private concessionaire to lend from banks. It will off-set risks associated with traffic. They (Malaysian investors) are keen to invest under this mode and have already purchased the bid documents for the project”, said a senior official in the Ministry of Road, Transport & Highways (MoRTH) who did not wish to be identified. The last date of submission of the bid is 15 September 2015.

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The government kicked off efforts to woo Malaysian contractors, who have been among the earliest investors in the roads sector in India, with a roadshow in Kuala Lumpur, earlier in April this year. Malaysian companies such as RBM-PATI (JV), CIDBI Malaysia, GMR-Tuni-Ankapalli Express Limited (Indian-Malaysian JV), Madhucon Projects Ltd-Binapuri (Indian-Malaysian JV), IJM-Gayatri (Malaysian-Indian JV), HO-HUP-Simplex (Malaysian-Indian JV) had substantially invested in the Golden Quadrilateral programme under Phase — I of the National Highways Development Project (NHDP). But investments since have petered out due to regulatory hurdles and weak economic sentiments.

Bids for the Delhi-Meerut Expressway will be awarded in three packages — a 27.5 km stretch on NH-24 (from Nizamuddin Bridge to Dasna), the 49.346 km stretch of the Hapur Bypass and the third portion covering a 8.36 km stretch from Delhi to

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Uttar Pradesh border — on hybrid annuity mode. The estimated cost of the project is Rs 663.60 crore.

The 14-lane road on NH-24, from Nizamuddin Bridge to Dasna, is expected to ease massive congestion on the stretch.

The six lanes in the center of the Nizamuddin Bridge-Dasna stretch will be an “expressway”, with limited entry and exits for seamless movement of long-haul traffic. The other eight lanes—four on each side—would be a normal highway and commuters won’t have to pay for using these lanes. The 22-km stretch of the Dasna-Hapur portion of the highway would be widened to six lanes.

NHAI has invited both technical and financial bids simultaneously with the target to award the project by October. The project will be implemented on “hybrid annuity” model where government takes all the risk including the traffic growth. Since in this model developers are assured of getting back their investment, there is hardly any doubt of the works not attracting bids from private players.

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.

Amrit Pandurangi, senior director, Deloitte India said, “The new model aims to take more risks to the public sector and make investments in roads projects more attractive for private players. There has been a change in approach since the new government came to power. The new risk-sharing structure is expected to bring in more bidders from the private sector, whose participation has almost dried up both at home and abroad over the last five years.”

The government has eased regulatory hurdles to draft in private investors and has till date this financial year managed to either award or is in advanced stages of finalising projects totalling about 1,000 km worth around Rs 13,500 crore on a build, operate, transfer (BOT-Toll) basis. This is in sharp contrast to the 734 km of roads projects valued at Rs 6,300 crore that was awarded on this mode in the whole of last financial year.

Given the response, the government is now aiming at awarding about 2,000 km of highway development projects on public-private partnership basis out of its total target of 10,000 km for the current financial year. The remaining projects are to be awarded on engineering, procurement, construction (EPC) basis and under the newly conceived hybrid annuity model.

“We have taken several decisions in the last few months to enthuse private interest in roads projects. Developers can now take out their entire equity in finished projects to undertake new ones. The NHAI has been authorised to loan resources to developers whose projects are stuck due to financial constraints,” informed another official.

For projects awarded on BOT-Toll basis, the government has approved the exit policy which allows a developer to move out of a project two years after the completion.

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This has been done to free up the locked capital for further investment in the infrastructure sector.