New hybrid model for road projects planned by NHAI

Mumbai: In a bid to make highway projects financially viable and attract large number of bidders, the ministry of road, transport and highways has suggested a hybrid model wherein the National Highway Authority of India would finance up to 40 per cent of the total project cost.

“As per the model, 40 per cent of the total project cost (TPC) is to be provided by the authority NHAI to the concessionaire (highway developer) during the construction period in the form of ‘Construction Support’. The support is to be disbursed in five equal instalments of 8 per cent each and the timing of each such payment shall be linked to percentage of project cost spent/physical completion milestones achieved by the concessionaire,” the proposal said.

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.

“In the past aggressive bidding and faulty traffic projections have led to many projects becoming financially unviable. Under the proposed model, the total cost for the concessionaire (highway developer) would be only upto 60 per cent of the total project cost. This will enable easier debt servicing by the highway developers as the quantum of debt required would be lower as compared to projects undertaken under the BOT model,” informed M. Murali, director general, NHBF.