Government plans to fund 40 per cent of the total cost of highway projects

Hyderabad: In an attempt to revive private investment in the road projects, the government has decided to fund 40 per cent of the total cost of highway projects and also initiated steps to control input costs like cement.

Under the hybrid model, the road developer under PPP model 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.“Hybrid model has been introduced after deliberating with different stake holders to restart PPP mode of projects in the road sector. I am confident with the introduction of this hybrid model, PPP interest in road sector will be rekindled,” said Union road transport and highways minister Nitin Gadkari in a tweet on Wednesday.

The hybrid model would partially reduce the burden of developers to arrange funding for the entire project. According to a media report, the construction support is to be disbursed in five equal installments of eight per cent each and the timing of each such payment shall be linked to percentage of project cost spent by the developer.

Despite welcoming the initiative as positive, road developers wish to see the fine print. “It is no doubt a positive step taken by the government and it indicates its resolve to revive the road sector. We need to know whether it will bring in the money as viability gap funding or equity, Mr. E. Sudhir Reddy, the chairman of Hyderabad-based construction company IVRCL Limited, told this newspaper. This decision, India Ratings director (infrastructure) Venkatar-aman feels, would revive some interest of developers in the road projects. “However, how much will it help in revive the sector depends on NHAI’s resolve to prevent aggressive bidding,” he said.

At an event, Mr Gadkari also accused cement firms of pushing up cost of highway projects by form a cartel and said that he will seek Prime Minister Naren-dra Modi’s intervention to break the cartel.