NHAI is Experimenting Different Financial Models for Funding its Projects
Posted: Apr 10, 2018
The Government of India has accorded a priority status to the Infrastructure sector. This move can be termed as a strategic one as it would wave a green flag to the interested-investors. Every sector is going to reap benefits from this much-awaited move. The highway sector in India is going to be one of the gaining grounds for investors as many relevant indices are blinking in favour of it. Reflecting the same, the NHAI started wooing investors with different financial models.
How important is this for NHAI?
Though the investment climate is good, that doesn’t mean the investors rush to every field with the same interest. They weigh many options before arriving at a conclusion. So, the cash-craving sectors need to win the confidence of investors through promising prospects as normally shining sectors will obviously take the first seat in paving ways for investments.
So, the National Highways Authority of India (NHAI), to allay fears and doubts of prospective investors and replace them with confidence, has been coming up with new financial models to fund its development projects.
Moves made by the NHAI in this regard:
The NHAI has been strategically heading to meet its credit needs. Some of its recent financial models, which deserve praises, are:
Hybrid Annuity Model:
The name is saying that this model is a hybrid of different models. Hybrid Annuity Model is first of its kind in highways sector as well as in India. This is a hybrid of Build-Operate-Transfer (BOT) and Engineering-Procurement-Construction (EPC) models. The NHAI has adopted this model to renew the pace of stalled projects in the highway sector. Under this model, the NHAI would provide an upfront investment of 40% of the total project cost estimates and provide the rest of the mentioned time intervals.
This model is a win-win game for both NHAI and Investors. To fund its developmental works, the NHAI has come up with Toll-Operate-Transfer (TOT) model. Under this model, the NHAI would award contracts to concessionaires to collect Toll for the routes, which the NHAI called for bids. Apart from collecting Toll Tax, the contractors shall have to maintain the highways according to the standards that would be the part of the agreement.
Till date, the NHAI has raised good amount, which went beyond its expectations. The NHAI and the Ministry of Road Transport and Highways (MoRTH) considered this model as one of the more successful models and trying to imitate this across all sectors.
In the coming days, the NHAI is sure to come with more innovative financial models, where the benefits trickle down to commuters.
#RoadtransportIndia #TollplazaIndia #Tolltax
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