Road Transport and Highways Minister Nitin Gadkari has said share of private investment in total road construction was about Rs 98,100 crore during the last five years. Citing reasons behind weak participation of private sector in road projects, he stated said one of the reasons could be that major highway developers had capacity constraints, including over-leveraged financials, due to excessive exposure to infrastructure projects including highways.
Besides, lack of availability of debt products and some banks reaching the ceiling as per sectoral exposure norms could be the other reason. To encourage private sector participation through adequate incentives, he mentioned that the Ministry of Road Transport and Highways has adopted Hybrid Annuity Model (HAM) with an objective to maximise the quantum of implementation of highway projects within available financial resources of the government.
Under HAM, 40% of the project cost is to be provided by the government as 'construction support' to the private developer during the construction period and the balance 60% as annuity payments over the concession period along with interest on outstanding amount to the concessionaire.
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