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Govt to cap budgetary allocations for annuity payments for PPP projects

18 Jan 2013 Evaluate

The government has decided to put a cap on budgetary allocations for annuity payments for the public private partnership (PPP) projects to do away the burden on future budgets. On the recommendations made by the Inter-Ministerial Task Force, the cabinet committee on economic affairs (CCEA) has approved the budgetary ceilings for annuity commitments under Public Private Partnership (PPP) projects across sectors.

Recommendations of the committee would ensure that the future budgetary options do not get restricted due to annuity payments for PPP projects. Moreover, the government has observed that annuity payments under PPP projects create a burden on future budgets for a long period of time, making the future budgets inflexible and committed.

Further, annuity payments are essential in the nature of deferred budgetary payments and are borne by the government out of the annual budgetary allocations spread over time. Unlike the projects sustained by user charges, annuity-based projects do not have a revenue stream of their own and essentially, rely on payments out of budgetary allocations over the years. Annuity charge is the periodic payment that the government makes to the concessionaire for financing, operation, construction and maintenance of the PPP project. 

Further, the guidelines would be communicated to ministries for adoption within two weeks. These guidelines will streamline the process of structuring and sanction of projects under annuity mode of PPP.

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