The Maharashtra government has decided to upgrade roads stretching up to 10,000 kilometres in the state in the next two years, adopting for the first time, a ‘hybrid annuity’ model along the lines of the Union government. The project is likely to cost the exchequer approximately Rs 30,000 crore.
The state government, which has so far relied on build-operate-transfer model or engineering procurement contracts for infrastructure development works, has decided to opt for the Centre’s hybrid annuity model to cut down on the large initial investment required for the project. The state cabinet approved the decision on Tuesday.
The hybrid annuity model is a balance between a public private partnership contract and an engineering procurement contract as the government puts in 40%, while the contractor contributes the rest. The private company recovers its investment over the next 15-20 years through installments from the government. The Centre conceived the hybrid annuity model largely to bring back private participation that had dried up in road projects over the last few years.
Commenting on the development, a state government official said, “Ideally, roads that are under the state public works department have to be upgraded every five years, but many have been neglected mainly due to lack of funds and need to be repaired urgently. We have decided to adopt the Union government’s hybrid annuity model, as the budgeted amount for the upkeep of roads is insufficient to improve the chosen length of 10,000 kilometre of roads.”
According to sources, the state government plans to start upgrading the roads from March 2017 and complete it in two years. The contractors will be liable to maintain and repair the roads taken up under this project for 15 years. The roads, once improved, will all be 10 metres wide and carpeted with tar.
Maharashtra has a road network of three lakh kilometres in the form of national highways, main state highways, district roads, other internal and rural roads. Of these, state the public works department looks after a road network of 90,000 kilometres.
Of these, the state government has selected those roads under the project that are essential for connectivity to taluka headquarters, district headquarters, agricultural and industrial centres, tourist and pilgrimage places, and those that cater to a large population or are heavily used.
The contracts for the 10,000 kilometres of roads will be given out in multiple packages of a minimum length of 100 kilometres at the cost of Rs 250 crore, the state government official said.
Maharashtra has a road network of 3lakh km of which 90,000km falls under the ambit of the state public works department
State to use hybrid annuity model for the first time. Under this model, state will contribute 40 percent of the total project cost, while the private party will put in 60 percent. State will pay the private company its investment in instalments over 15 years. This brings down the state’s upfront investment, as well as ropes in the efficiency of the private sector, while retaining the project’s control with the state.
Until now, infrastructure works have been executed on either a build, operate, transfer model, where the private party brings the investment and then recovers it from either toll or payments from the state, or an engineering procurement contract model, where the state pays a contractor for execution.