Upgrades of 750-km of highways
The Asian Development Bank (ADB) has signed a US$490 million loan for public-private partnership (PPP) project to upgrade about 1,600 km of state highways and major district roads (MDRs) from single-lane to two-lane widths in the state of Madhya Pradesh.
An additional US$286 million investment will be mobilised through private sector participation under the PPP modality, said the Finance Ministry on 20 Dec 2010. The loan was signed with the Indian Government.
Upgrade of these roads under the project will improve rural and peri-urban connectivity in the state and improve access to markets and better services, said Sameer Kumar Khare, Additional Secretary (Fund Bank and ADB), Department of Economic Affairs, after signing the loan.
This agreement will open a new partnership by introducing PPP through the hybrid-annuity model (HAM), thereby leveraging government financing and improving sustainability of capital investments, added Kenichi Yokoyama, Country Director of ADB’s India Resident Mission.
The HAM is a mix of engineering, procurement, construction, and build-operate-transfer. This passes the responsibility of design, implementation, and operation and maintenance obligations to the private sector, while attracting some private sector financing.
Under this model, the government will release 60% of the total project cost during construction, to be paid to the concessionaire in tranches linked to completion milestones, the Ministry said.
The remaining 40% is arranged by the concessionaire in the form of equity and commercial debt. Once the project is completed, the government will repay the concessionaire’s financial investment over 10 years.
The project will upgrade 750 km of state highways and 850 km of MDRs to two-lane and all-weather standards with road safety features.
It will also develop an e-maintenance system, which can record defects or required maintenance, along with a training program to develop capacity on contract implementation and project finance in the Madhya Pradesh Road Development Corporation.
Since 2002, ADB has provided the state government with five loans to develop its road network, improving about 7,300 km of roads or about 11% of the total network. fiinews.com
