Government approves Hybrid Annuity model for highway projects in India

The cabinet committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has given its approval for the Hybrid Annuity Model as one of the modes of delivery for implementing the highway projects. The main objective of the approval is to revive highway projects in the country by making one more mode of delivery of highway projects.

Adopting such a model for projects not found viable on BOT (Toll) mode shall be more effective in terms of maximizing the quantum of kilometers implemented within the available financial resources of the Government.

By adopting the model as the mode of delivery, all major stakeholders in the PPP arrangement would have an increased comfort level resulting in revival of the sector through renewed interest of private developers/investors in highway projects and this will bring relief thereby to citizens / travelers in the area of a respective project. 

An important feature of the Hybrid Annuity model is the rational approach adopted for allocation of risks between the PPP partners - the Government and the private partner i.e. the developer/investor. While the private partner continues to bear the construction and maintenance risks as in toll projects, it will only partly bear the financing risk. Further, the developer is insulated from revenue/traffic risk and the inflation risk, which are not within its control.