Govt’s big infra push: Nod to road projects worth Rs 50,655 crore
- In a big push to infrastructure spending, the Union government approved eight national high-speed corridor projects
Highlights:
- Under these projects 936-km length highways will be constructed at a cost Rs 50,655 crore.
- The implementation of these projects will generate 4.42 crore mandays of direct and indirect employment.
- Four of these eight highways will be executed under the Build-Operate-Transfer (BOT) model, indicating the government’s keenness to return to PPP (Public Private Partnership) projects.
- In the last financial year, only one of the total 176 projects was tendered under the BOT model.
- Under the BOT model, the private player owns up the investment risk, builds the projects fully on its own and maintains it for a specified period.
- It recovers the costs by collecting toll during this period, also called the concession period.
- Having liberalised the model concession agreement, the government hopes the eight projects will make the private sector assume some financial risk and return to build highways under PPP mode.
- Such projects also create both direct and indirect employment.
- It also brought in a new concept called ‘construction support’, under which NHAI would pay upto 40 percent of the total project cost to the company building the highway in 10 installments linked to physical progress in construction.
- Earlier, NHAI would provide only equity support to the company.
- Of the remaining four highways, three are Hybrid Annuity Model (HAM) projects, and one will be executed under the EPC (Engineering, Procurement and Construction) mode.
- Under the EPC model, the company building the road does not carry any financial risk and the government pays it for laying the roads.
- HAM is a blend of the EPC and BOT model, where the private player is able to limit its risk.
- NHAI pays upto 40 percent of the project cost, and the balance is raised by the private player. Here, the private company maintains the road for the duration of the concession period, but the government collects the toll.
Prelims Takeaway
- PPP models