1. Hybrid annuity model: Developers bid for four-laning of UP highway

Hybrid annuity model: Developers bid for four-laning of UP highway

Some projects likely to be awarded under the hybrid annuity model

By: | Updated: December 11, 2015 5:04 AM

The road ministry’s innovative hybrid annuity model for highway development, in which the government would pay 40% of the project cost, has started bearing fruit with four developers putting in bids for the four-laning of a 61-km stretch connecting Meerut with Bulandshahr in western Uttar Pradesh.

Ministry sources told FE after evaluating technical bids from Ashoka Buildcon (in association with investment banker Macquarie), APCOS Ltd, PNC Infratech and Sadbhav Engineering, the financial bids would be opened to identify the most competitive bidder for awarding the project before the end of this month.

This project which would have an estimated R1,666 crore capital cost (project cost R683 crore plus R983 crore pre-construction activities) would be the first project to be awarded under the model, which was evolved to revive the private sector participation in the highway sector. “We are certain that the appropriate allocation of risk and increased comfort level of lenders, this model will improve both the pace and quality of highway development in India,” said Rohit Kumar Singh, joint secretary (highways), ministry of road transport and highways.

up-highway

The hybrid annuity model, which gives a lot of additional cushion to the developers compared with the traditional PPP projects, faced a lot of criticism from within and outside the ministry, particularly after the very first attempt for a project in Himachal Pradesh failed to attract a single bid recently.

After examining PPP projects which were on the decline, the government identified two problems that were coming in the way for private sector investment into the sector that included non-availability of sufficient equity in the market. This prompted the government to shift to the EPC model in 2014, but it soon felt that the PPP model needed to be revived to reduce the cost of road construction to the government.

The road ministry intends to award a total of 21 projects in the remaining period of current fiscal, with a total length of 1,511.56 km requiring an estimated cost of R28,087 crore. Sources in the ministry said 96.92% of the 357.149 hectares of required land has already been acquired for the Meerut-Bulandshahr stretch. It has also received environment and forest clearances.

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