Govt to provide financial support to highway projects

In a bid to rekindle private investment in the road sector, the government will now provide financial support by funding 40 per cent of the total cost of highway projects during the construction period.
The concessionaire would be required to bear the balance 60 per cent of the project cost through a combination of its equity contribution and debt raised from the market.
"Hybrid model has been introduced after deliberating with different stake holders to restart PPP mode of projects in road sector," Union Road Transport and Highways Minister Nitin Gadkari said.
The 'construction support' is to be disbursed in five equal installments of 8 per cent each and the timing of each such payment shall be linked to percentage of project cost spent by the concessionaire.

Many private companies in the past have shied away from the government's attempt to bring public-private-partnership (PPP) model in road projects due to factors such as hurdles in land acquisition, slow decision making and financial constraints.
The Road Ministry has said that the major advantages of the model are reduced initial capital outflow for the government compared to the EPC (engineering, procurement and construction) mode.

The hybrid or the annuity mode also means reduced equity investment requirement by the developers.
The minister tweeted, "I am confident with the introduction of this hybrid model, PPP interest in road sector will be rekindled."

The 12th Five Year Plan (2012-17) estimated an investment of USD 95 billion or Rs 5.7 lakh crore for the highways sector, 50 per cent of which is expected to come through private sector participation.