CCEA approves hybrid annuity model for highway projects

New Delhi, Jan 27 (IANS) The central government on Wednesday approved the ‘Hybrid Annuity Model’ as one of the modes for implementing highway development projects in the country.

The decision was taken by the Cabinet Committee on Economic Affairs (CCEA), which was chaired by Prime Minister Narendra Modi during its meeting held here.
According to the CCEA, the main object of the model is to revive highway development projects by creating more modes of delivery.
The CCEA elaborated that the new model will increase financial comfort for all the major stakeholders in the PPP (public private partnership) arrangement namely – the authority, the lender and the developer.
“Concessionaire would have an increased comfort level resulting in revival of the sector through renewed interest of private developers/investors in highway projects and this will bring relief thereby to citizens/travellers in the area of a respective project,” the CCEA said in a statement.
“It will facilitate uplifting the socio-economic condition of the entire nation due to increased connectivity across the length and breadth of the country leading to enhanced economic activity.”
Under the new model, projects will be financed only to a certain extent by the private investor. This investment will be recovered through annuity payments by the government over a specified period.
“The balance percentage of the project cost is provided by the government during the construction period,” the statement said.
In addition, the new model will ease the burden on the government coffers, as it will reduce dependence on the public funded engineering, procurement and construction (EPC) mode for development of highway projects.
The Ministry of Road Transport & Highways (MoRTH) had to increasingly resort to the EPC mode during 2013-14 and 2014-15.
“MoRTH intends to introduce an alternative mode of delivery in order to sustain the pace of implementation of highway projects through optimum utilization of available financial resources,” the statement noted.
“This model also provides an increased comfort level for the lenders and concessionaires as traffic and inflation risks are taken by the authority.”