A PPP Project means a project based on a contract or concession agreement between a Government or statutory entity on the one side and a private sector company on the other side, for delivering a service on payment of user charges. The rights and obligations of all stakeholders including the government, users and the concessionaire flow primarily out of the respective PPP contracts. There are various types of PPP models.

Some of the PPP models are discussed below:

The Hybrid Annuity Model (HAM)

As per the design, the government will contribute to 40% of the project cost in the first five years through annual payments (annuity). The remaining payment will be made on the basis of the assets created and the performance of the developer. Here,  a  hybrid  annuity  means  the  first  40%  payment  is  made  as  a  fixed  amount  in  five  equal installments whereas the remaining 60% is paid  as variable annuity amount after the completion of the project depending upon the value of assets created.

As the government pays only 40%, during the construction stage, the developer should find the money for the remaining amount. Here, he has to raise the remaining 60% in the form of equity or loans. There is no toll right for the developer. Under HAM, Revenue collection would be the responsibility of the National Highways Authority of India (NHAI). Advantage of HAM is that it gives enough liquidity to the developer and the financial risk is shared by the government. While the private partner continues to bear the construction and maintenance risks as  in  the  case  of  BOT  (toll)  model,  he  is  required  only  to  partly  bear  the  financing  risk.  The government’s policy is that the HAM will be used in the stalled projects where other models are not applicable.

BOT Toll Model

In this toll-based BOT (Build Operate and Transfer) model, a road developer constructs the road and he is allowed to recover his investment through toll collection. This toll collection will be over a long period which is nearly 30 years in most cases. There is no government payment to the developer as he earns his money invested from tolls.

Engineering, Procurement and Construction (EPC) Model

Under  this  model,  the  cost  is  completely  borne  by  the  government. It invites bids for engineering knowledge from the private players. Procurement of raw material and construction costs are met by the government.  The  private  sector’s  participation  is  minimum  and  is  limited  to  the provision  of  engineering  expertise.  A  difficulty  of  the  model  is  the  high  financial  burden  for  the government.

O & M (Operation & Maintenance)

In an O&M contract, a private operator operates and maintains the asset for the public partner, usually to an agreed level with specified obligations. The payment for this contract is either via a fixed fee, where a lump sum is given to the private partner, or more commonly a performance-based fee.

Swiss Channel model

Here government tries to reduce the cost for their project. By this model projects are             put in the public domain for competition and bidder which is able to build it with the lowest     cost will be awarded the bid.

PPPP model (Public Private People Participation)

It is used largely in irrigation projects. Major costs are incurred by private players. Farmers are also invited for their ideas or to share the cost,so that once the project is created   there should not be any complaint from the farmer of the command area.

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