Transport Update

World Bank to re-examine viability gap, annuity model for NHAI projects

December 2010

The World Bank is ready to re-examine its norms on funding the viability gap and annuity payment for highway projects in order to reach a mutually acceptable model. India’s road transport and highways ministry has sought a loan of $2 bn. The loan has been a subject of serious discussion of late as the World Bank has asked for some changes in the annuity model observed by India. However, finance ministry is against the sought changes.

The multi-lateral funding institution wants that National Highways Authority of India (NHAI) to give a pre-specified percentage of total project cost to the concessionaire as cash-support-during-construction, unlike the current model of making semi-annual payment at the time of maintenance.

Finance ministry opined that frequent changes in the bid documents of road projects may deter investors from taking up the contracts. The government had recently implemented key amendments in the bid documents to attract more private companies. The amendments include one-time payment of viability gap funding.

Contact: National Highway Authority of India. Tel: 011-2507 4100. Fax: 011-2509 3507. Website: www.nhai.org

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