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Rural roads set to go PPP way with pvt funding

business Updated: Jul 18, 2011 23:19 IST
Anupama Airy
Anupama Airy
Hindustan Times
Anupama Airy

The ambitious plan to build a vast network of rural roads, hit by delays linked to a shortage of funds, is going the highways path. The government is planning to throw it open to the private sector under a public-private-partnership (PPP) model that would bring in investments on the one hand and assure reasonable returns to entrepreneurs on the other.

The Pradhan Mantri Gram Sadak Yojana (PMGSY), which connects far-flung villages through all-weather roads to help farmers and agricultural trade, will likely take a leaf out of the the National Highway Development Programme (NHDPs).

“The proposal for a PPP model to develop rural roads under PMGSY has the consensus of the Planning Commission as also the ministry of rural development,” said a senior government official.

The issue was discussed at a recent meeting of the high-level steering committee on the transport sector for 12th five-year plan which is headed by B K Chaturvedi, member (energy and transport), Planning Commission.

As rural roads are unlikely to be run on revenues leveied through toll charges, the government is considering annuity-based schemes to incentivise private parties to invest in these projects.

Under such schemes, private developers are empowered to design, finance, build and maintain the roads in a model where the government is contractually obliged to pay them on an annualised basis after the project’s completion.

“The government will likely carry out a pilot project involving development work of approximately 500 km or rural roads,” said a source who did not wish to be identified.

The private sector participants would be granted a concession for the design, finance, construct and maintain the roads for a definite period.

In the current fiscal year ( 2011-12) an outlay of Rs 20,000 crore has been allocated for construction of rural roads.

“A separate sub-group on rural roads is being set up for the formulation of the 12th plan and the Ministry of Rural Development along with the Planning Commission will assist in chalking out the details of the PPP Model to be used in the construction of rural roads,” the source said.

Under a model that the government is considering, rural roads for a specific area would be offered to a private partner by bundling of several contiguous rural roads into one contract package of R50-100 crore. Normally rural road contracts are smaller and can go as low as R1 crore.

The concession period for maintenance will also likely to be increased significantly from the current five years to about 20 years.