CCEA approved hybrid annuity model for highway projects

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Who: Hybrid annuity model for highway projects
What: Approved by CCEA
When: 27 January 2016

The Cabinet Committee on Economic Affairs (CCEA) on 27 January 2016 gave its approval for the Hybrid Annuity Model as one of the modes of delivery for implementing the Highway Projects.

The main object of the approval is to revive highway projects in the country by making one more mode of delivery of highway projects.

Under this model, the government will provide 40 percent of the project cost to the developer to start work while the remaining investment has to be made by the developer

Key highlights of hybrid annuity model

By adopting the model as the mode of delivery, all major stakeholders in the PPP arrangement – the Authority, lender and the developer, concessionaire – will have an increased comfort level.

The increased comfort level will result 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.

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.

An important feature of the Hybrid Annuity Model for highways development is the rational approach adopted for allocation of risks between the PPP partners – the Government and the private partner i.e. the developer/investor.

Background

The decision taken on 11 September 2014 by the CCEA has delegated the authority for deciding on the mode of delivery of highway projects to Ministry of Road Transport & Highways.

The erstwhile Planning Commission developed the first version of the Model Concession Agreement (MCA) for highways in 2006. This was done considering the need to standardize documents and processes for the PPP framework in the country for ensuring uniformity, transparency and quality in development of large-scale infrastructure projects including highways.

Since the need for improved road connectivity was a continuing imperative, the Ministry of Road Transport & Highways including its implementing agencies like the National Highways Authority of India (NHAI) had to increasingly resort to the public funded Engineering, Procurement and Construction (EPC).