Hybrid annuity model: Rs 1,918-cr expressway projects draw positive bids

The hybrid annuity model for road construction, in which the government would pay 40% of the project cost, is gaining traction. Bidding for two projects on the Delhi-Meerut Expressway costing a total of Rs 1,918 crore has elicited good response, sources said.

While a Rs 796-crore project for adding more lanes along a 8.7-km stretch on the expressway received two bids (Ashoka Buildcon and Welspun Group), four companies are in the fray for another 22.3-km (Rs 1,122 crore) project on the expressway. Last week, the widening of the 61.2 km of the Meerut-Bulanshahr section of NH-235, to be built at an estimated capital cost of Rs 1,600 crore had received four bids from APCOS, Sadbhav Engineering, Ashoka Buildcon and PNC.

The ministry of road transport and highways (MoRTH) had invited bids for two of the three packages for the widening of the Delhi-Dasna-Meerut Expressway into six lanes, for which the due date was on Tuesday. The widening of the road would decongest the stretch on which around 1 lakh vehicles ply every day. This would also help in reducing the level of pollution in the National Capital Region.
“The 23.5-km third package, with a six-lane configuration along with a major bridge, to be built at an estimated cost of Rs 1,122 crore, has received bids from Apcons, Sadbhav Engineering, Ashoka Buildcon and PNC,” Rohit Kumar Singh, joint secretary, highways, MoRTH, told FE. The bids for the second package is still open.

This is the second biggest success of the hybrid annuity model, which was conceived as a necessity to attract private sector firms in the highway development. The hybrid annuity model, which allows the concessionaires to bear the balance 60% of the project cost through a combination of debt and equity, faced a lot of criticism from within and outside the ministry, particularly after the very first attempt for a project in Himachal Pradesh failed to attract a single bid recently. The road ministry intends to award a total of 21 projects in the remaining period of current fiscal, with a total length of 1,511.56 km requiring an estimated cost of R28,087 crore.

“The success of the model is expected to continue in the days to come, thereby contributing significantly to the revival process currently on for the highways sector,” Singh added. The highways sector is on a revival. Against a paltry 3,169 km of highway projects awarded in 2013-14, a length of 7,980 km was awarded in 2014-15 and 10,000 km are targeted to be awarded in 2015-16, of which 5,331 km have already been awarded till November 30. During 2012-13 and 2013-14, highway projects, particularly those that were to be developed through the PPP mode, were not able to get bids due to a variety of reasons, including general economic conditions.