Hybrid annuity model for PPP projects

The hybrid annuity model announced by the Government that proposes to reduce risks in public private partnership format is likely to provide impetus for the next wave of PPP road projects, said ICRA. The model is a mix of EPC and BOT formats, with the government and the private enterprise sharing the total project cost in the ratio of 40:60, respectively. National Highways Authority of India (NHAI) had recently laid down the guidelines for the hybrid annuity model (HAM) in which the government funding to the extent of 40 per cent of the project cost will come in five equal instalments during the construction period, thus reducing the financial burden on concessionaire during the project implementation phase. ´When compared with EPC projects, shift to HAM would ease the cash flow pressure on NHAI. Moreover, spends can be recovered to an extent through tolling of these stretches by NHAI itself. Therefore, NHAI´s own upfront funding requirement will be lower in case of hybrid annuity compared with EPC mode,´ ICRA´s Senior Vice-President Rohit Inamdar said.