Cabinet clears hybrid annuity model for national highways
Photo Credit: Shah Junaid/VCCircle

The cabinet committee on economic affairs (CCEA), headed by Prime Minister Narendra Modi, has cleared a hybrid annuity model for national highways, in a move to revive highway projects in the country by making one more mode of delivery of such projects. 

The model, which is not found viable on build, operate & transfer (BOT)- toll, seems to be more effective in terms of maximising the quantum of kilometers implemented within the available financial resources of the government. 

The hybrid model will provide stakeholders in public-private-partnership (PPP) arrangements—NHAI, creditors and developers—enhanced comfort in reviving stalled road projects, the statement said.

Under this model, while the government provides 40 per cent of the construction cost, the developer invests the rest over the duration of the project’s execution. Revenue collection would be the responsibility of NHAI; developers will be paid in annual instalments over a specified period of time.

The model will be the fourth to be introduced in India for the execution of road projects and is intended to kick-start stalled projects and accelerate highway construction. Road projects in India are awarded in three formats—BOT annuity, BOT-toll and EPC.

“It will facilitate uplifting the socio-economic condition of the nation due to increased connectivity across the country, leading to enhanced economic activity,” the statement said.

The new model will reduce equity investments by developers and initial capital outflow for NHAI. Besides, it mandates NHAI to acquire 90 per cent of land and all the necessary environment clearance before awarding a project.

Earlier, the PPP model mandated that developers tie up 100 per cent of the investment through a mix of equity and debt.

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