Union Cabinet approves Hybrid annuity model for highway projects

Union Cabinet recently approved the Hybrid annuity model for the country’s highway project. The model aims to attract private investment and reduce the risk of developers. PPP model fails to get bids for a project and developers find it difficult to complete the project on time. The Hybrid annuity model is a win-win situation where government will invest the 40 percent of highway project cost to start the work and the developer can invest the remaining project cost. Under the new model, the government will bear the revenue risk where toll collection is anticipated to be lower due to less traffic flow.

Meanwhile, Prime Minister Narendra Modi had laid the foundation stone for Delhi-Meerut expressway and the project was bidded out in this model. With the approval of this new model, the country will have one more mode of delivery for highway projects. The new model mandates NHAI to get all the necessary environmental clearance and acquire 90 per cent of land before awarding the project. The improved connectivity will boost nation’s socio-economic condition leading to enhanced economic activity.