The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved the Hybrid Annuity Model as one of the modes of delivery for implementing the highway projects. Adopting such a model for projects not found viable on Built Operate Transfer (BOT-Toll) mode will be more effective in terms of maximising the quantum of kilometres implemented within the available financial resources of the Government.
A Road Ministry official said the main objective of the approval is to revive highway projects in the country by making one more mode of delivery of highway projects. “This is a new concept for fast-tracking the highway projects, revive the Public-Private-Partnership (PPP) mode and attract more investments in the sector,” said the official.
Under this model, the Government will provide 40 per cent of the project cost to the developer to start work while the remaining investment has to be made by the developer.
A statement by the Ministry of Road Transport and Highways said by adopting the model, all major stakeholders in the PPP arrangement — the Authority, lender and the developer, concessionaire — would have an increased comfort level resulting in revival of the sector through renewed interest of private developers/investors in highway projects and this will bring relief thereby to citizens/travelers in the area of a respective project.
An important feature of the Hybrid Annuity Model for highways development is the rational approach adopted for allocation of risks between the PPP partners — the Government and the private partner i.e, developer/investor.
While the private partner continues to bear the construction and maintenance risks as in BOT (Toll) projects, it is required only to partly bear financing risk. “Further, the developer is insulated from revenue/traffic risk and the inflation risk, which are not within its control,” said the official.
“It will facilitate uplifting the socio-economic condition of the entire nation due to increased connectivity across the length and breadth of the country leading to enhanced economic activity,” added the official.
Minister of Road Transport and Highways Nitin Gadkari recently had said to encourage private participation, the Centre have also introduced a hybrid model, where the Road Ministry will share the risk with them. This was done considering the need to standardise documents and processes for the PPP framework in the country for ensuring uniformity, transparency and quality in development of large-scale infrastructure projects.
Since the need for improved road connectivity is a continuing imperative, the MoRTH including its implementing agencies like the National Highways Authority of India (NHAI) had to increasingly resort to the public funded engineering, procurement and construction.
The Government said there is an inherent limitation in implementing projects on EPC mode as such implementation is restricted by the financial resources available with the Government.
“In that context, MoRTH intends to introduce an alternative mode of delivery in order to sustain the pace of implementation of highway projects through optimum utilisation of available financial resources. Accordingly, it was decided to consider the Planning Commission MCA for Annuity Projects-version April, 2014,” said the statement. The model claims to provide an increased comfort level for the lenders and concessionaires as traffic and inflation risks are taken by the authority.