Hybrid Annuity Model

Sandeep Upadhyay
Sandeep Upadhyay, MD & CEO - Centrum Infrastructure Advisory Ltd
Road sector continues to be a formidable force to revive the capital expenditure cycle in the badly battered Infrastructure sector. While much has been talked about the evolution of the sector the Model Concession Agreement has witnessed several revisions over a period of time. In the last couple of years a slew of policy reforms including positive iterations in the Concession Agreement addressing issues around handing over Right Of Way, rephrasing termination clause, allowing 100% exit, easing refinancing norms are certainly firm steps in the right direction however the investor sentiment still remains subdued. While these initiatives have led to revival in pace of execution of road projects it is imperative for the Government to customize the roll out plan with a fresh approach. In the current context of fluid macro environment with most of the Banks reeling under huge NPAs, I foresee most of the Capital expenditure (CAPEX) in the Road sector primarily shall be undertaken on the Government's balance sheet atleast for the next couple of years.

While Engineering Procurement & Construction (EPC) model will continue to thrive and dominate the interest evinced from majority of the road construction companies it may not be the most efficient model to roll out projects given NHAI's limited financial bandwidth vis-à-vis the huge development plan envisaged. MORTH has set an ambitious target of laying more than 40 km per day in FY 2016-17 which is significantly higher than the current pace of execution. The target to award contracts in the road sector has been set at 25,000 km in FY17 as against 10,000 km awarded in the last financial year. In order to meet these targets the total outlay for road and highways has been pegged at Rs.97,000 cr for FY17 in the recent Union Budget.

Taking cue from the current subdued market situation, NHAI recently launched the Hybrid Annuity Model (HAM) which is a mix of EPC and BoT (Annuity) Model wherein the government intends to minimize financing risk with 40% of the Project cost funded as Grant during construction and the balance 60% financed on the private sector player's balance sheet primarily against Annuity payments to be received over 15 years or so. While on one hand, HAM to a large extent has neutralized risks around financing, inflation, cost escalation etc. on the other hand it offers a unique model of bidding for projects as a combination of CAPEX and OPEX parameters. The key takeaway being this flexibility could be potentially leveraged to align with an optimum asset monetization structure in future.

This section of the article is only available for our subscribers. Please click here to subscribe to a subscription plan to view this part of the article.

Atasi Das, Assistant Vice President, G R Infraprojects, explains the concept of the Perpetual Pavement in India’s expressway constructions and its practical implementation with due consideration of layers, materials, and thicknesses

Read more ...

Dr. Rakesh Kumar, Senior Principal Scientist & Pankaj Goel, Senior Technical Officer, Rigid Pavements Division,CSIR-Central Road Research Institute (CRRI), New Delhi, give information on the Performance of Curing Compounds in Strengthening

Read more ...

The construction and maintenance of roads with flexible pavements in very cold regions where annual temperatures range between +30oC to -35oC has got its own challenges. The bitumen in the asphalt layer becomes hard at such low temperatures

Read more ...

The Bundelkhand site team achieved yet another feat on 15 Jan 2022 by completing 13 deck slabs of varying types in just 46 days. Therefore, it is a demonstration of exemplary display of overall project executing capabilities

Read more ...

Er. Devjyoti Paul, Project Manager & Er. Harpreet Singh, Chief Project Manager, B&SEC, share the technical and construction features of three bowstring girder ROBs, recently constructed under Package I & III of Purvanchal Expressway in the state of Uttar Pradesh

Read more ...

Use of Extruded Polystyrene Sheets (XPS) in the construction of the Zojila Approach Road has been especially effective as XPS is the most suitable, convenient, and cheaper solution for mitigating frost action on pavements, increasing the life of pavements

Read more ...

The Indian road network is the second largest globally, with a length of around 63.86 lakh km. The outbreak of the virus towards end-FY20 had created panic globally, leading to the temporary suspension of economic activity

Read more ...

Roads and Railways boost awards; tenders up marginally Overall tendering grew 5% YoY during H1FY22 Awarding activity grew at a 2-year CAGR of 22% in H1FY22 Infrastructure credit near all-time highs

Read more ...

There are many challenges being faced by the highway sector such as ensuring availability of construction materials and machinery, timely completion of projects, availability of trained human resources

Read more ...

Practical Recommendations for Construction of Longitudinal Joints in Hot Mix Asphalt (HMA) Pavements Rajib B. Mallick, Ralph White Family Distinguished Professor, Civil and Environmental Engineering, Worcester Polytechnic Institute (WPI), Massachusetts, USA, and Veeraragavan

Read more ...

Plant and Equipment Determine Quality of Road Construction Road Infrastructure projects are time constrained; early completion of project entitles rewards while delays attract penalties. The plants and equipment being used determines the quality of the road

Read more ...

Designing roads and highways efficiently with the right materials will help achieve optimum construction cost, lower maintenance, and reduce life cycle costs. Ash from coal-fired thermal power

Read more ...

Rodic Consultants has emerged as a leader in the infrastructure consulting space with state-of-the-art engineering solutions, and a proven track record of timely completion of projects across sectors

Read more ...

Readymade Kandhal Pothole Patching Mix was adopted as Indian Roads Congress (IRC) Standard Specification IRC: 116-2014 for Readymade Bituminous Pothole Patching Mix Using Cut-Back Bitumen. All concerned

Read more ...

The Bundelkhand Expressway is a 296-km long, 4-lane wide (expandable to 6 lanes) access-controlled expressway in the state of Uttar Pradesh. It will connect Gonda village in Chitrakoot district with Agra–Lucknow

Read more ...

This case study briefly discusses the planning, design and construction of Package 3 of the Purvanchal Expressway. Package-3 of the Purvanchal Expressway is a 41.7km long section of the 340.82km long

Read more ...

Since the 1980’s billions of dollars have been invested in developing methods to make pavement design and construction more sustainable through the re-use of existing resources. This includes insitu recycling and

Read more ...

India has the second largest road network in the world, spanning a total of 5.89 million km, transporting 64.5% of all goods in the country. Nearly 90% of India's total passenger traffic uses the road network to commute

Read more ...

India generates nearly 26,000 tonnes of plastic waste every day, making it the 15th biggest plastic polluter globally. Discarded plastic waste litter the country’s roads, rivers and also form huge mounds in garbage

Read more ...

According to Vipula Sharma, Director – Ratings, Brickwork Ratings, with the recent tweaking in the HAM model, the share of the projects awarded under HAM model is expected to increase. “Overall, there should be a

Read more ...

×
Sign-up for Free Subscription
'India Construction Week'
Weekly e-Newsletter on Construction Industry
Get the latest news, product launches, projects announced / awarded, government policies, investments, and expert views.