The Hybrid Annuity Model has helped to increase investments in road infrastructure by rebalancing project risks between the public and private sectors. Discuss.

Hybrid annuity model involves government and private developer jointly investing in the project cost on a 40:60 ratio, with government payment in annual annuity is based on quality of work done.

Balancing project risks between public and private sector:

• 40% of cost borne by government – easing financial pressure on private partner.
• Annual payment on quality of work – no traffic risks on private partner.
• Enables better quality of roads, transport development.
• Government involvement ensures better credit access for private party.
• Government assured of work done within a specified time frame.
• Fixed project cost and quality monitoring.

Risks:

• Long gestation period.
• Reluctance in credit access due to NPAs.
• Corruption and red tapism.
• Traffic consideration in roads, reluctance for private investors.

Way forward:

• Adoption of Kelkar committee recommendations regarding statutory regulatory body, dispute resolving mechanisms.
• Development (including industrial) to ensure sufficient traffic on road.
• Monitoring of quality standards by NHAI and Quality Council of India.

Topics: GS-III: Economic Growth Development • GS-III: Infrastructure Ports Roads Airports Railways • GS-III: Investment Models