NEW DELHI: Paving the way for widening of highway stretches under a new mode of public private-partnership (PPP), builders have tied up funds to construct 15 such corridors worth nearly Rs 11,500 crore, road transport and highways ministry officials said. Some of the projects that have achieved financial closure include the widening of two stretches of NH-24, which connect Delhi with Uttar Pradesh, and Ludhiana elevated highway.
In all these projects, India Infrastructure Finance Company Ltd (IIFCL) is the lead banker. Getting funds from banks is the most significant step for a project to take off, especially when lenders were initially reluctant to lend to private players undertaking the “hybrid annuity” model. Under this model, National Highways Authority of India (NHAI) is responsible for land acquisition, estimating traffic flow and collecting the toll. It pays the developer biannual annuity for recovering investment and interest costs besides the expenses for operations and maintenance. Hence, private players face no risk in such projects. In addition, the government provides 40% of the project cost as viability gap funding (VGF) or grant and hence private players need to put small equity to raise bank loan. Usually , the equity contribution of private players is reduced to only 9-10% of the project cost, which was one of the concern areas for the lenders.
“This proposal appropriately balances the risks and it has found many takers. More projects under this model are being rolled out,” said Rohit Singh, a joint secretary in the highways ministry .
Government had come out with this PPP model for highway construction to beat the crisis caused by drying up of funds as several private players were under financial stress. In addition, there were fears that the companies may not be able to get sufficient traffic on the stretches, resulting in tepid response.
Credits ET Realty