A hybrid model introduced five years ago to speed up construction of roads to bridges has paid off with Asia’s third-largest economy now allocating almost half of its highway projects under this arrangement. Yet, some of the older problems persist.
India’s highway construction in public-private partnership collapsed after the peak of 2011-2012. Partly because returns from aggressive bidding of the past didn’t live up to expectations. And land acquisition was invariably delayed, increasing costs. Banks, too, became reluctant to fund projects as their bad loans rose.
In January 2016, the National Highways Authority of India came up with the hybrid annuity model. It’s a combination of outright government-funded contracts and the built-operate-transfer system where the bidder has to bring in capital and recover the money over a period of time.
Share of HAM projects rose quickly and the pace of highway construction spiked, hitting the a record of 36.5 kilometres a day in 2020-21. The model ran into trouble because of the liquidity crisis after the collapse of IL&FS Financial Services Ltd., prompting the government to tweak some of the norms.