Equitable Annuity payments will avert liquid crunch, says Dilip Suryavanshi
As the year 2016 is soon to commence, Highway Developers have much to rejoice about. The government has decided to make annual payouts to the developers during the entire duration of a project in order to avert liquid crunch at the developer’s end. This is in huge contrast with the earlier practice of providing increasing annual payments that end with higher payments at the end of the concession period.
Dilip Buildcon says that paying equitable annuity payments will lead to a reduction in the need for funds, result in early payback and make road projects more lucrative for the developers. The model Concessionaire Agreement (MCA) would be changed accordingly for projects which will be awarded under the recently conceptualized hybrid annuity model. This would be first implemented for the the Delhi-Meerut expressway project. “We are changing the formulation,” National Highways Authority of India chairman Raghav Chandra told ET. He said developers will now receive equitable annuity payment.
Chandra also said that the bi-annual annuities given to private players after completion of project increase over years. Dilip Suryavanshi of Dilip Buildcon says that the changed policy will provide developers with more money in hand to service loans in initial years. In spite of government taking a number of steps in past few months to reduce the stress, private players often have to push for more changes as they face severe capital crunch.
Hybrid Annuity Model (HAM) is a mix of engineering, procurement and construction and build-operate-transfer formats, with the government and the private companies sharing the project cost 40:60. Under this, land acquisition and environmental clearances will be handed over to developer before the construction commences.
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