The Asian Development Bank (ADB) and the Government of India today signed a $490 million loan for public-private partnership (PPP) project to upgrade about 1,600 km of state highways and major district roads (MDRs) from single-lane to two-lane widths in the state of Madhya Pradesh. An additional $286 million investment will be mobilised through private sector participation under the PPP modality. The signatories to the loan agreement were Sameer Kumar Khare, Additional Secretary (Fund Bank and ADB), Department of Economic Affairs, Ministry of Finance, and Kenichi Yokoyama, Country Director of ADB's India Resident Mission.
The project continues ADB's engagement with the state's road sector since 2002. This will open a new partnership by introducing PPP through the hybrid-annuity model (HAM), thereby leveraging government financing and improving sustainability of capital investments.The HAM is a mix of engineering, procurement, construction, and build-operate-transfer. This passes the responsibility of design, implementation, and operation and maintenance obligations to the private sector, while attracting some private sector financing. Under this model, the government will release 60% of the total project cost during construction, to be paid to the concessionaire in tranches linked to completion milestones. The remaining 40% is arranged by the concessionaire in the form of equity and commercial debt. Once the project is completed, the government will repay the concessionaire's financial investment over 10 years.
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