In a first, Rlys to build 6 freight lines with pvt firms using highways' hybrid funding model, Pg1

Key Highlights:

• The Public Private Partnership Appraisal Committee (PPPAC) under the Ministry of Finance has approved six new freight railway lines, totaling 647 km, to be developed under the Hybrid Annuity Model (HAM).
• This marks the first time Indian Railways will implement projects using the HAM, a funding model previously successful in the highways sector.
• The total bid project cost for these six lines is ₹15,976 crore, with a total capital cost of ₹40,866 crore over the concession period.
• Four of the six projects are located in Odisha, with one each in Telangana and Jharkhand, primarily focusing on transporting coal, iron ore, and other key commodities.
• Indian Railways will contribute 40% of the bid project cost as a grant during construction, with the private party financing the remaining 60%.

HAM in Railways.jpg

Detailed Insights:

• The shift to the Hybrid Annuity Model (HAM) from the earlier Design, Build, Finance, Operate, and Transfer (DBFOT) model was based on market feedback to attract more private investment.
• Under HAM, Indian Railways will bear the traffic and tariff risks, ensuring a more predictable revenue stream for private concessionaires.
• The private partners will receive annuity payments, interest on the remaining 60% of the capital cost, and regular payments for maintenance of assets.
• Construction for all six projects is slated to begin in April 2028, with bidding expected in the financial year 2027-28.
• This initiative is part of a broader strategy by Indian Railways to overcome financial bottlenecks and attract long-term private sector capital for infrastructure development.
• Beyond these six projects, 49 other projects worth approximately ₹1.80 lakh crore are in the pipeline for execution under the Public Private Partnership (PPP) mode.

Key Concepts Involved:

• Public Private Partnership (PPP): A long-term arrangement between a government agency and a private entity for providing public infrastructure or services.
• Hybrid Annuity Model (HAM): A PPP model where the government pays a fixed percentage (e.g., 40%) of the project cost during construction and the remaining amount as annuity payments over the operational period, sharing risk with the private developer.
• Design, Build, Finance, Operate, and Transfer (DBFOT): A PPP model where the private entity designs, builds, finances, operates the project for a concession period, and then transfers it back to the government.
• Public Private Partnership Appraisal Committee (PPPAC): An inter-ministerial body under the Ministry of Finance that appraises PPP projects in the Central Sector to ensure their viability and proper structuring.