Government to tweak highway development norms to push private investment
Sources said three highway projects will be taken up on hybrid model, which will be a mix of government funding and annuity models.
By TNN | Updated:
NEW DELHI: Caught in tight financial condition, the road ministry is trying a "hybrid" model to execute highway projects besides allowing private developers to fully exit from any project two years after the start of toll collection.
While the first move aims at making unviable projects viable, the latter will help unlock huge amount of equity of developers, caught in highway projects on public-private-partnership (PPP) mode, enabling them to take up new projects.
Sources said three highway projects - one each in Odisha, Bihar and Karnataka - will be taken up on hybrid model, which will be a mix of government funding and annuity models.
At present, there are three models for highway development - BOT (toll), BOT (annuity) and engineering procurement and construction (EPC). While in EPC, government foots the entire investment, in case of BOT (toll) the developer is responsible to tie up fund and runs the risk of recovering the investment from toll collection. In case a project is unviable, government provides grant or viability gap funding up to maximum 40% of the project cost. In case of BOT (annuity), private developers tie up fund to complete project and government pays back to the developers the entire investment and profit in installments spread over a certain period of time.
"In hybrid project, we will provide 40% of the project cost as VGF. Hence, the developer has to arrange the rest 60% of investment and it would be easier for them. Earlier, it used to tie up 100% investment in the form of equity and loan. Once a project is completed, NHAI will collect toll and the pay back to the developer. This will reduce government's upfront investment," said a source.
Official felt that developers can get loans for such projects since the risk of toll collection is borne by NHAI and private players can easily put their equity.
"We are also taking the proposal of allowing 100% exit of private players from projects to the Cabinet. This will help them to take out the equity, which is otherwise stuck for years. They can put this equity to raise loan to take up new projects," said a ministry official.
While the first move aims at making unviable projects viable, the latter will help unlock huge amount of equity of developers, caught in highway projects on public-private-partnership (PPP) mode, enabling them to take up new projects.
Sources said three highway projects - one each in Odisha, Bihar and Karnataka - will be taken up on hybrid model, which will be a mix of government funding and annuity models.
At present, there are three models for highway development - BOT (toll), BOT (annuity) and engineering procurement and construction (EPC). While in EPC, government foots the entire investment, in case of BOT (toll) the developer is responsible to tie up fund and runs the risk of recovering the investment from toll collection. In case a project is unviable, government provides grant or viability gap funding up to maximum 40% of the project cost. In case of BOT (annuity), private developers tie up fund to complete project and government pays back to the developers the entire investment and profit in installments spread over a certain period of time.
"In hybrid project, we will provide 40% of the project cost as VGF. Hence, the developer has to arrange the rest 60% of investment and it would be easier for them. Earlier, it used to tie up 100% investment in the form of equity and loan. Once a project is completed, NHAI will collect toll and the pay back to the developer. This will reduce government's upfront investment," said a source.
Official felt that developers can get loans for such projects since the risk of toll collection is borne by NHAI and private players can easily put their equity.
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"We are also taking the proposal of allowing 100% exit of private players from projects to the Cabinet. This will help them to take out the equity, which is otherwise stuck for years. They can put this equity to raise loan to take up new projects," said a ministry official.
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While some states were added on India's railway map for the first time in 2014, Mumbai saw multiple connectivity enhancements in terms of roads and metro connectivity. Yet another addition to India's infrastructure was the inauguration of the country's largest solar plant.
Railway lines, roadways, airports and metro connectivity - India's saw many major infrastructure developments in 2014. We take a look at twelve prominent ones:
