Govt approves hybrid annuity model for highway projects

New Delhi: The government on Wednesday approved hybrid annuity model for building roads to fast-track highway projects, revive the Public-Private-Partnership (PPP) mode and attract more investments in the sector.

"The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Narendra Modi, has given its approval for the Hybrid Annuity Model as one of the modes of delivery for implementing the Highway Projects," said a statement from the Ministry of Road Transport and Highways.

Under this model, the government will provide 40 percent of the project cost to the developer to start work while the remaining investment has to be made by the developer.

"Adopting such a model for projects not found viable on BOT (Toll) mode, shall be more effective in terms of maximising the quantum of kilometers implemented within the available financial resources of the Government," the statement 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, it said.

It 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," the government said.

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, it said.

Road Transport and Highways Minister Nitin Gadkari has recently said, "No one (private players) was ready to participate in the PPP-based projects as they had lost faith (in the previous government). However, to encourage private participation, we have also introduced a hybrid model, where we will share the risk with them."

The decision taken on September 11 last year by the CCEA has delegated the authority for deciding on the mode of delivery of highway projects to the ministry.

The erstwhile Planning Commission has developed the first version of the Model Concession Agreement for roads in 2006.

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.

Subsequently, the Planning Commission had developed various other versions of the MCA for highways considering the different PPP modes like BOT (Toll) and BOT (Annuity) addressing to a significant extent, the sector's changing needs of the sector.

"One of the documents developed by the Planning Commission for infrastructure including highways is the MCA for Annuity Projects -version April, 2014," the statement said.