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‘HYBRID ANNUITY MODEL’ – a new version of PPP

The lukewarm response of private sector towards the standard PPP model has forced the Government to devise alternative models to rope in private sector for infrastructure projects.

Of the 8500 kms of road development projects planned to be awarded by the Ministry of Roads, Transport and Highways (MoRTH) during the financial year 2015-16, projects covering approximately 4000 kms are intended to be awarded on the basis of this new model HAM.  As per HAM, the Concessionaire or private partner will be provided with 40% of the project cost the by the government (of course against bank guarantees by the developer or partner) to enable start of project work. The developer would be required to invest the remaining share of project costs.  Now, instead of the developer collecting the revenue by way of toll, the NHAI will collect this and reimburse the developer his investments over a mutually agreed tenure – say 10 or 15 or 20 years – including a margin of profit for the developer.  As the marketing risk now shifts to NHAI, a government agency, the banks will be more comfortable in lending for the project.

The remaining projects covering 4500 kms of road development will continue on the earlier models of BOT variants or EPC.  The EPC or the Engineering, Procurement and Construction model was tried in the last two years with mixed success. 

 

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