With the much touted public private partnership (PPP) model failing to attract investors for the highways sector, the road transport and highways ministry has conceived a new “hybrid PPP” model — the government will bear 40% of the construction cost and the developer will invest the remaining.
The earlier PPP model mandated that developers tie up 100% of the investment through a mix of equity and debt. But with a slowdown in the economy, private developers were finding it difficult to tie up funds. In the last three years, 21 PPPs worth Rs 27,000 crore failed to get bids with developers citing lack of equity.
“Under the new hybrid annuity model, not only will the NHAI support 40% of the project cost in five equal installments, the government will also bear the revenue risk in projects with a low anticipation of traffic flow,” said Vijay Chhibber, secretary, highways ministry.
Highways minister Nitin Gadkari said 13 projects worth Rs 14,442 crore had already been identified to be awarded under the new model.
Pushed by drying investments, the highways ministry even began awarding projects on EPC (Engineering Procurement Construction) mode, where the government provided 100% funding.
“This (the new model) will revive the PPP model, and it can be replicated in other infrastructure sectors as well.The new model will also reduce initial capital outflow for NHAI,” said Rohit Kumar Singh, joint secretary, highways ministry.
Besides, the new model also mandates that NHAI should acquire 90% of land and all the necessary environment clearance before awarding a project, a condition not specified in the earlier model. The ministry plans to build 20,000 km of highways in the next four-five years, requiring investments of about of Rs 1.86 lakh crore.