ADB injects $490-mn in MP's rural roads

The Asian Development Bank (ADB) and the Central government have signed a $490 million loan for public-private partnership (PPP) to upgrade about 1,600 km of state highways and major district roads (MDRs) from single-lane to two-lane in Madhya Pradesh. An additional $286 million investment will be mobilized through private sector participation under the PPP modality. The development will open up a new partnership by introducing PPP through the hybrid-annuity model (HAM), thereby leveraging government financing and improving sustainability of capital investments. HAM is a mix of engineering, procurement, construction, and build-operate-transfer and transfers the responsibility of design, implementation, operation and maintenance obligations to the private sector, while attracting some private sector financing as well. Under this model, the government will release 60% of the total project cost during construction, to be paid to the concessionaire in tranches linked to completion milestones. The remaining 40% is arranged by the concessionaire in the form of equity and commercial debt, and once the project is completed, the government will repay the concessionaire's investment for over 10 years.