Government to cap allocations for annuity payments for PPP projects

NEW DELHI: The government today decided to put a cap on budgetary allocations for annuity payments for the PPP projects to do away the burden on future budgets.

"The CCEA has approved the recommendations made by the Inter-Ministerial Task Force...on budgetary ceilings for annuity commitments under Public Private Partnership (PPP) projects across sectors," an official statement said.

The recommendation of the committee, headed by Planning Commission member B K Chaturvedi, would ensure that future budgetary options do not get restricted due to annuity payments for PPP projects.

Annuity charge is the periodic payment government makes to the concessionaire for financing, construction, operation and maintenance of a PPP project.

The government is of the view that annuity payments under PPP projects create a burden on future budgets for a long period of time, making future budgets become inflexible and committed.

"The guidelines would be communicated to ministries for adoption within two weeks. These guidelines will streamline the process of structuring and sanction of projects under annuity mode of PPP," the statement said.

Annuity payments are typically borne by the government out of the annual budgetary allocations spread over time and are essentially in the nature of deferred budgetary payments.

Annuity-based projects, unlike the projects sustained by user charges, do not have a revenue stream of their own and essentially, rely on payments out of budgetary allocations over the years.