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Friday, Jan 17, 2020
Home / Mumbai News / CM tells PWD to scrap hybrid annuity model for road projects

CM tells PWD to scrap hybrid annuity model for road projects

mumbai Updated: Dec 10, 2019 00:36 IST

Chief minister Uddhav Thackeray has directed the administration to change the hybrid annuity model for road construction in the state adapted by the previous government.

The administration has been directed to tap funding from international financial institutes instead of paying higher interest rates on funding raised by private companies or contractors.

The previous Fadnavis government had introduced the hybrid annuity model for the construction of state highways and major district roads, wherein 40% of the construction cost would be borne by private entities or contractors while the state government would pay the rest 60%.

After launching the scheme in September 2017, the government had aimed at completing construction of 10,584km of road at a cost of ₹30,000 crore.

Currently, the construction and upgradation of 8,654km of roads under 146 packages is underway, with 40% participation from private contractors at ₹3,502 crore.

The contractors are to be paid back for their contribution over a period of ten years in 20 equitable instalments. The contractors, however, have the responsibility of maintaining the roads for 10 years.

However, the deferred payment to private entities or contractors attracts high interest rates of up to 18%, thus the government ends up more.

Chief minister Uddhav Thackeray, during his review meeting of the public works department (PWD) on Monday, directed the department to go for cheaper loans from international financial institutions such as Asian Development Bank (ADB) or World Bank, which fund long-term or soft loans at much cheaper rate.

The PWD has tapped the funding of about $1,500 million (approximately ₹10,653 crore) for the construction and upgradation of 5,000km of roads from ADB at an interest of about 2%.

“We construct, upgrade about 8,000km roads every year. The loan at cheaper rate may be used for these roads,” said an official from PWD.

The official said that even though the department decided to scrap the hybrid annuity model, it would not be able to scrap the ongoing contracts.

Thackeray has also directed the department to adapt state-of-the-art technology for road construction. “The traditional construction system should be replaced with modern technology and models to ensure longevity of roads,” the official said.