The Hindu Business Line : Highway authority seeks comments on BOT funding models

New Delhi, June 27 The National Highways Authority of India (NHAI) has invited comments from various stakeholders on a pure ‘annuity’ and ‘hybrid’ model to implement highway projects on a build-operate-transfer (BOT) basis.

The ‘hybrid’ model is broadly an indirect way for the NHAI to offer the developers a higher level of viability gap funding (VGF) in the existing BOT (toll) model for four-laning of highways.

Both the NHAI and the Finance Ministry, it appears, are unlikely to support the hybrid model.

Officials are unable to understand why an indirect method of paying higher VGF should be adopted.

Also, a year and a half ago, the Economic Advisory Council of the Prime Minister had examined a hybrid model concept and had disapproved of it, it is learnt.

Working hybrid model

The annuity model has been worked out by the NHAI after discussions with the Finance Ministry. The hybrid model has been suggested by the Planning Commission.

Both the models have lower risk for the highway developers compared to the BOT (toll) model.

This is how the hybrid model works: In projects implemented on the BOT (toll) model, the concessionaire is allowed to collect the toll revenues during the concession period and claim up to 40 per cent of the project cost as VGF (viability gap funding). In the hybrid model, in case a concessionaire seeks VGF of over 40 per cent, then the incremental VGF can be paid to the concessionaire as an annuity income by the NHAI.

Annuity basis

In the BOT (annuity) model, the developer incurs the construction cost and receives an assured level of income during the concession period from the NHAI. The toll revenue from the project accrues to the NHAI during the concession period.

“If a project is not perceived as profitable by developers, it can simply be taken up on a BOT (annuity) basis,” said official sources.

“The NHAI had invited comments from the Planning Commission on a pure BOT (annuity) model, which had been finalised by the NHAI after consultations with the Finance Ministry. The hybrid model is the ‘modified’ version sent by the Planning Commission,” said an official source.

More Stories on : Roadways | Business Models

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Vizhinjam offer revoked due to long delays: Lanco

SpiceJet posts Rs 7.8-cr net loss

Shipping Ministry to take ‘fresh look’ at partnership projects

Highway authority seeks comments on BOT funding models