With the build, own, operate and transfer (BOOT) model failing to attract investors for the expressway, annuity has emerged as a preferable model. Under this model, a developer is awarded contract to undertake project and cost of building the road is paid to the developer on a yearly basis, including interest and profit margin, after the projects starts commercial operations.
A month ago, an Indian firm — Infrastructure Leasing & Financial Services (IL&FS) — had also proposed the government to construct the Fast Track road in annuity contract. “Since this model involves monetary issues, we are seeking MoF’s consent on Wednesday,” said Tulasi Prasad Sitaula, secretary of MoPIT. He added that they would also have to take approval of the Cabinet, once MoF gives a go ahead.
IL&FS is one of the companies that did not submit the request for proposal last year to construct the road under public private partnership of BOOT model. Now, three foreign firms, including IL&FS, have proposed to build the Fast Track road.
According to Sitaula, MoPIT has also corresponded with two other companies — Shapoorji Pallonji (India) and China Infrastructure Investment Corporation (CIIC) — to present their plans in detail.
CIIC has expressed interest in engineering, procurement and construction (EPC) model and assured of bringing loan from EXIM Bank of China. While, even as Shapoorji Pallonji proposed for the project, it presented no clear development model. According to MoPIT officials, if any proposal of foreign firms is found feasible, they will accept it — be it annuity or EPC model.
The project linking the Capital with Terai in Nijgadh, Bara, is estimated to cost around Rs 100 billion. Nijgadh is also location where the government plans to build a second international airport. In a bid to build the road by any means, Project Coordination Committee under National Planning Commission, had earlier decided to keep all doors open, including BOOT model.
The expressway project is listed as a national priority project. However, its construction is yet to start as financing mechanism has not been decided upon yet. Besides the foreign firms, World Bank, too, has been showing interest to fund the project as loan. A source at MoPIT said that even as taking a loan from the World Bank was possible, they were less likely to go for it because of the lengthy procedure and various applicable conditions.
The bank has shown interest in offering a loan through International Bank for Reconstruction and Development (IBRD) for the Fast Track road. IBRD works on promoting sustainable development through loans, guarantees, risk management products, and analytical and advisory services in middle-income and creditworthy poorer countries. - See more at: http://thehimalayantimes.com/fullNews.php?headline=Govt+exploring+alternative+models+for+%27fast+track%27+road+construction&NewsID=413318#sthash.5HTyC8VY.dpuf
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