In order to make projects under the public-private-partnership (PPP) mode more financially feasible, the government is seeking to provide highway builders greater financial assistance.
Currently, this type of finance, called viability gap finance (VGF), is limited to 40 per cent of the project’s total cost. According to media reports, highway authorities would make annuity payments in stages to cover any VGF over this maximum cap, under the proposed arrangement.
According to sources, the government is eager to draw in more private investment in the infrastructure sector, so a framework for the updated VGF mechanism will be established.
The proposal’s timing is important since the highway ministry and NHAI are finalising a revision to the contract document for projects constructed under the build-operate and transfer (BOT)-Toll mode in an effort to draw in more private participation in the highway sector.
To increase the highway sector’s profitability, the government changed a number of clauses in the contract agreements. Additional modifications are being made in response to input from private highway builders and project funding organisations. One such modification is the suggestion that 95 per cent of the land in BOT-Toll projects be made available prior to the commencement of construction.