The Ministry of Road Transport and Motorways has introduced the hybrid annuity model for the implementation of motorway projects in order to promote private sector participation through appropriate incentives. The objective is to maximize the quantum of highway projects implemented within the limits of the government`s available financial resources. According to this model, 40% of the project costs must be paid by the government as « construction support » for the private developer during the construction period and 60% in repo during the duration of the concession, as well as interest on the outstanding amount to the concessionaire. There is a separate provision for O&M payments made by the government to the concessionaire. The individual does not have to bear the risk of traffic. All payments were indexed to inflation by a multiple price index, which is a weighted average of WPI and CPI (IW) on a 70:30 basis. This reduces the risk of inflation for the developer. The main changes introduced in HAM`s revised standard concession agreement are that interest subsidies on future HAM projects are now linked to the average marginal costs of interest rates on loans based on the funds of the five main commercial banks provided for compared to the compound interest to be paid under the existing agreement. On 10 November 2020, the Ministry of Road Transport and Motorways published a revised model concession agreement for new HAM-based road projects to address the key issues facing stakeholders under the existing concession agreement and to increase the appetite for road projects based on the hybrid annuity Model (HAM). Interest rates on annuities for HAM projects are considerable, with around 45% of total entries during the concession term.
In the TOT model, the right to collect and monopolize royalties for certain operational highway (NH) projects built with public funds is granted to concessionaires (developers/investors) for a predetermined concession period, upon advance payment of a lump sum to NHAI. This transfer of rights is based on the toll revenue potential of the identified NH projects. The operation and maintenance (O&M) obligations of such projects are due to the concessionaire until the end of the concession period. The concessionaires of these projects shall be designated under a transparent and uniform procurement procedure within a pre-established and approved implementation framework. Users do not have a license to copy, modify or distribute the content without the permission of the original owner. Annuity hybrid model for the implementation of motorway projects. DEATH: MONETIZATION OF PUBLICLY FUNDED NATIONAL HIGHWAY PROJECTS. The government approved the proposal to allow NHAI, monetize publicly funded NH projects that operate and generate toll revenue for at least two years after CSB through the toll operate transfer (ToT) Model, subject to case-by-case approval by the competent Authority of MoRTH/NHAI. This report was written by an external party. BloombergQuint does not guarantee the accuracy of its content and is not responsible for it. The content of this section does not constitute investment advice.
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