What is hybrid annuity PPP model? How can hybrid annuity PPP bring efficiency and sustainability in sewage treatment?
Hybrid annuity PPP is a mix of the EPC (engineering, procurement and construction) and BOT(build, operate, transfer) models. In EPC model, government pay private players to build infrastructure. The private player plays no role in ownership, maintenance. On the other hand in BOT model private player play a prominent role in building, operation and maintenance of infrastructure for a specified period of time before transferring the asset back to the government.
In case of HAM EPC (40 per cent) and BOT -Annuity (60 per cent) are combined. Government, invest 40% of total project cost and payments are released into instalments based on milestones. The developer arranges remaining 60 %. HAM balance the risk between developers and the Government. The government pay the balance through an annuity over the contract duration, which may be up to 20 years.
One of the major reason behind polluting water bodies is the fact that a bulk of sewage flowing from towns and cities are discharged untreated into rivers and other water bodies. In most of the cases due to lack of financial resources, sewage water is not properly treated. The recent move to arrange fund through HAM for the sewage treatment plants, in Varanasi and Haridwar Ganga, is therefore commendable. This will help in many ways as water bodies will be less polluted also the water can be reused after necessary treatment.The project cost can be recovered by levying a reasonable user charge based on polluter-pays principle.
The model of Hybrid PPP for sewage treatment should be replicated for another service like solid waste management. With a rapidly increasing population in Urban India, HAM model can ensure financial resources for sewage and solid waste treatment.