The World Bank has agreed to support the government’s public-private partnership (PPP) programme in the highway construction sector. Hitherto, the international funding agency’s exposure was limited to government-funded road projects.
“World Bank has agreed to look at funding in our viability gap and annuity projects, which was not the case before. So we are identifying new areas of cooperation and looking forward to institutional support,” road transport and highways minister Kamal Nath said after a meeting with World Bank chief Robert Zoellick, who is here on a visit.
Viability gap, or the amount the government pays to a private sector highway developer to make the project viable, is an essential component in a PPP project.
In annuity mode of highway construction, a developer gets paid half-yearly by the National Highways Authority of India for the capital cost incurred by him.
The government has also sought the agency’s support for mega road projects. “The World Bank is keen to deepen its engagement in infrastructure, particularly the road sector. We are also looking at institutional support in best practice. We are looking at World Bank assisting us in formulation of our mega projects,” said Nath.
“We have proposed working with the International Finance Commission (IFC) for our expressways plan right from the beginning to figure out what will be viable projects for us because it is new to us. And we want to take the advantage of the experience of World Bank and the IFC not only in terms of their financial resources but also sharing with them the wide spectrum of issues they have dealt with globally,” said Nath.
The road is being prepared for frictionless collaboration on PPP projects with the World Bank. “There are two aspects of the World Bank assistance on PPP projects. A technical assistance programme will be held in December this year relating to the best global practices on VGF. Secondly, for technical, financial and legal issues related to the expressways, we will closely interact with the Bank whole of next year,” transport secretary Brahm Dutt said.
On the $3 billion loan the government is negotiating with the World Bank, Nath said, “We are working with the Department of Economic Affairs for World Bank assistance for converting our 6,000 km one-lane highways to two-lanes. It is at an advanced stage.”
“The plan for two-laning of single lane highways has been sent to the World Bank for scrutiny. Detailed progress report for upgrade of 4,000km has already been prepared by the ministry,” Dutt said.
As for the finance ministry’s reservations on the quantum of the loan, Nath said, “The $3 billion loan is over a period of time. Obviously, there are so many projects in India from social sector and other areas. We may take it in tranches.”
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