IDFC looking at new models for road projects

IDFC looking at new models for road projects
AGENCIES

CHENNAI, MAY 31: India is developing a couple of new revenue models for attracting private capital to road sector projects, the head of Infrastructure Development Finance Corporation (IDFC) said on Wednesday.

He said a pilot project for four-laning a 65-km (40-mile) stretch of highway in the eastern state of West Bengal had recently been thrown open for international bids on an annuity-based revenue model, based on IDFC's model agreement.

"The annuity model is based on availability of funds in the road fund and the fact that we give both the O&M (operation and maintenance) and EPC (engineering, procurement and construction) contract to the same person and the response so far has been encouraging with six international and two domestic bids being received."

Under this model, the government will pay the private concessionaire a fixed annual fee for building, operating and maintaining the road.

In April, the Indian government approved the creation of a fund for the development and maintenance of roads and railways through a new levy on petrol and diesel fuel.

The National Highway Authority of India (NHAI) proposes to mobilise Rs 2,000 crore ($4.49 billion) from this fund for road projects, including the widening of highways, which currently have only two lanes in most places, to four or six lanes.

"This annuity model is being tried for the first time and if it succeeds, we hope to have a template which can be quickly replicated across other road projects," Munjee said.

He said the other model suggested by IDFC and being attempted by the NHAI on a stretch of highway in southern Andhra Pradesh state, involved a shadow toll where the private operator levied a toll on the government based on traffic estimates.

IDFC -- set up two years ago by a clutch of state-run financial institutions for developing structural mechanisms for attracting large-scale private capital to infrastructure -- now expects a significant rise in infrastructure funding.

"Our target for the year to March 31, 2001 is for disbursals of about 18-20 billion Rupees and we see projects in all the key sectors -- telecom, power, roads, ports and urban infrastructure, mainly water supply, taking off this year onwards," Munjee added.

"IDFC disbursed a total of 6.42 billion Rupees in 1999/2000(April-March) with a majority of the funding being divided among energy and telecom projects."