Friday, July 12, 2024

Government to Utilize PPP Mode for Majority of National Highway Projects

In a significant change in policy, the National Highways Authority of India (NHAI) will now use the Public Private Partnership (PPP) mode for most new national highway (NH) construction projects. This means that private investors will play a more significant role in building and maintaining these highways, instead of relying solely on government funding or engineering, procurement, and construction (EPC) projects.

This shift has been made because PPP projects tend to result in better-quality highways that require less maintenance compared to government-funded projects. The Union Road Transport Secretary, Anurag Jain, explained that larger projects costing more than Rs 500 crore would preferably be executed under the PPP mode. PPP projects can take the form of build-operate-transfer (BOT) models or hybrid annuity models (HAM).

For context, private companies have had to spend approximately Rs 100 crore each on immediate maintenance for five highway stretches out of ten projects acquired from NHAI, which were originally built under the EPC mode. In contrast, the remaining five corridors, constructed under the PPP mode, did not require immediate maintenance.

Union Road Transport Minister Nitin Gadkari has emphasized that roads built using the EPC mode need maintenance relatively soon after construction. However, highways built under the BOT mode are typically of higher quality because private entities are responsible for maintenance costs for 15-20 years. Hence, the government has decided to prioritize the construction of highways under the BOT and HAM modes.

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