1. Road-building projects: Nitin Gadkari says HAM overtakes pure public-private partnership model

Road-building projects: Nitin Gadkari says HAM overtakes pure public-private partnership model

Hybrid annuity model (HAM) highway projects have gathered pace with a majority of the 78 stretches awarded — entailing a total investment of about Rs 1.25 lakh crore — reaching financial closure, minister for road transport and highways Nitin Gadkari said on Thursday.

By: | New Delhi | Published: June 2, 2017 7:08 AM
nitin gadkari, Hybrid annuity model, HAM, rail building projects, nitin gadkari on rail building projects Minister for road transport and highways Nitin Gadkari. (Express Photo)

Hybrid annuity model (HAM) highway projects have gathered pace with a majority of the 78 stretches awarded — entailing a total investment of about Rs 1.25 lakh crore — reaching financial closure, minister for road transport and highways Nitin Gadkari said on Thursday.

The HAM model, meant to attract the elusive private equity into road development projects, had a slow start as bankers remained unconvinced about it given the very low equity participation by developers. The government is betting big on the model as the pure public-private partnership (PPP) projects are hardly eliciting any response from investors.

Speaking at the Express Group’s Idea Exchange programme, Gadkari said: “There were 18 (HAM) projects lying with IDFC and a few were with State Bank of India. Bank officials had little confidence earlier. But now, we don’t have a problem. They have cleared all of them.”

In 2016-17, HAM projects were awarded for a stretch of 2,434 km while pure PPP (build-operate-transfer) projects accounted for just 422 km.

In the current year, the government hopes to award 4,000 km of roads via the PPP route; the majority of this — around 3,000 km — is proposed to be awarded as HAM projects. Evolved primarily out of necessity as private investments in the highways sector was on the decline, HAM has been seen as a substitute for pure PPP projects. Under HAM, 40% of the project cost comes as a grant from the National Highways Authority of India, while the concessionaire’s equity contribution is 15% of the remaining 60% of the project cost, which is effectively just 9%.

To make the model more attractive, government recently tweaked it by allowing NHAI to disburse its contribution in the early stages of construction rather than in the later stages as was originally proposed.

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Lamenting the fact that the “system” was not moving as fast as he expects it to even as funds weren’t a problem, Gadkari said delays in getting clearances, completion of paperwork and the attitude of the officials were coming in the way of fast-tracking highway development.

The minister said the goal of highway construction at a pace of 41 km a day would hopefully be met by March 2018. The government had kept the 41 km a day construction target for the last fiscal also, but it could achieve only 23 km per day.

Gadkari said apart from `65,000-crore budgetary support, his ministry has raised `8,000 crore from Life Insurance Corporation of India and

Rs 5,000 crore through masala bonds. Stating that LIC was also ready to lend an additional ` 50,000 crore at an interest rate of 7.25%, he said there wasn’t an urgent need to implement the plan to monetise 104 state-funded projects through the toll-operate-transfer model.

“We will tap the TOT model when necessary,” he said.

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