Buoyed by the success of hybrid annuity model or HAM in the highways sector, the Centre has decided to test the innovative funding mechanism in building “bus ports” in every state.
It will soon appoint consultants to decide the contours of the investment format for the private sector in transport infrastructure that has so far been largely the domain of the government. The bus ports, having a component of real estate, would be developed on the lines of airports to improve passenger experience while bringing corporate funding to the sector.
Industry experts said real estate developers like Shapoorji Pallonji and Hiranandani group could be interested in these projects. Long-term financial investors like Brookfield Asset Management with 10-15 years horizons could also bid for the proposed bus ports.
The Centre would provide up to 40 per cent viability gap funding (VGF) for developing public transport infrastructure. It has asked state governments to suggest sites for proposed bus ports so that consultants could be appointed for pre-feasibility study and financial model suitable for them. The financial model for development of bus ports could be build, operate and transfer (BOT), HAM and EPC depending on their project viability.
Sandeep Upadhyay, MD (infrastructure), Centrum Capital, said HAM would better the prospect of developing the bus ports. “With HAM the financing challenge will come down and hence it's a good move. The government has been contemplating HAM not just in bus ports but also for various water projects,” he said.
The bus port could be developed as a greenfield or a brownfield project provided the location is suitable in the feasibility study.
Besides, the proposed facilities would also have space for commercial development.
The commercial facility may be developed in phases by the developer based on the commercial potential of the projects. The developer will ensure that operation of bus port is put into operation first.
With very little private investment flowing into the highways sector, a lot many projects have been bid out for development on HAM model under which equity component in financing is higher and provided by the government.
The hybrid annuity model is a combination of BOT (annuity) and EPC (engineering, procurement and construction) wherein government and private developers share the project cost in the ratio of 40:60 respectively. This seeks to significantly reduce the investment risk for private companies and revive the interest in highways sector.