Wooing private highway developers

In its latest bid to revive private investment in highways, the road transport and highways ministry has come out with a new model – where the government takes most of the risks so that developers get easy finance including from provident, insurance and foreign fund managers. The Ministry said that Hybrid Annuity – for bidding for at least 13 highway stretches totaling about 1,100km and involving `14,500Cr investment would start in the coming months. “Private investment will flow since developers have to put less equity to get finance from both banks and other fund managers,” said, Vijay Chhibber, Secretary, Ministry of Road transport and Highway.

Under this new model, which was hailed by several infrastructure majors, government will provide 40% of the project cost during construction period and for maintenance during the entire contract period. The payment of the rest of the amount to private player would come in installments spread over 10-20 years as annuity. The government will recover the installment payments and its upfront investment from collection of toll charges. The new model has clear-cut provisions of at least 90% land availability and green clearances as preconditions for awarding any project. Moreover, there are provisions for incentive to private developers for completing projects early. A penalty will be imposed for delayed work beyond 90 days of the set deadline.