With the Planning Commission has been insisting the National Highways Authority of India (NHAI) to avoid build operate and transfer (BoT) annuity model of road construction and look for alternative models, the authority has now proposed a hybrid model containing features of toll and annuity schemes of highways development under public-private partnership (PPP).
Both BoT (toll) and BoT (annuity) are a part of the PPP route of highways construction. While in BoT (toll), the operator is entitled to earn toll revenues through the concession period, in BoT (annuity), the operator gets returns on his investments in form of semi-annual payments from NHAI. In addition, there is a provision of viability gap funding (VGF) up to 40% of the project cost in toll-based projects, while annuity-based projects do not have such provision.
Under the proposed scheme, in the scenario of VGF required for a project being more than 40%, the annuity payment will be made for the funding requirement in excess of 40%. Significantly, even while the government will make the incremental payment, the concessionaire will be allowed to collect the toll through the concession period. NHAI is now in the process of inviting reactions from various stakeholders on the proposed funding scheme of highways construction and expects a positive response from them. ??We expect a positive response from the developers who, under this scheme will be entitled to earning returns on the projects in two streams. However, while the developers will be entitled to toll revenues, the Annuity component will be comparatively lesser,?? said an NHAI official.
Annuity bills have been a major cause of concern for the Planning Commission as out of 60 road projects worth Rs 70,000 crore to be bided by December last year, 47 have yet to find takers. It has been opposing NHAI plans to take them up on annuity keeping in consideration the fiscal strain it would inflict on the economy, which is already facing slowdown pressures.
??We have been planning to convert the BoT (toll) projects that could not attract bidders to annuity. However, the Planning Commission discouraged the move and asked to work out an alternative model instead,?? said a top NHAI official. Incidentally, speaking on the lackluster performance to BoT (toll), minister for road transport and Highways and Kamal Nath, earlier said, ??We have to look at workable models. There is no use having a PPP and not having a bid. There is no use having platforms that do not work.??