India’s first Sewage Treatment Plant under Hybrid Annuity Mode

A tripartite agreement has been signed between National Mission for Clean Ganga (NMCG) and the state level executing agencies Uttarakhand Pey Jal Nigam and Uttar Pradesh Jal Nigam, with concessionaires for setting up of India’s first Sewage Treatment Plants under Hybrid Annuity mode, at Haridwar and Varanasi.

The agreement is a major step forward in realizing the dream of Nirmal Ganga as it is the first time ever in India that Hybrid Annuity-based PPP mode is being applied in sewerage sector.

Under this agreement, the maintenance of the project will be the responsibility of the concessionaire for which there will be performance based phased manner of payment. This would ensure continued performance of the sewage infrastructure assets created due to better accountability, ownership and optimal performance.

What do you need to know about the Hybrid Annuity Model?

The Government of India had accorded Cabinet approval to Hybrid Annuity-PPP model in January 2016 with 100% central sector funding.

Under this model, the development, operation and maintenance of the sewage treatment STPs will be undertaken by a Special Purpose Vehicle (SPV) to be created by the winning bidder at the local level. As per this model, 40% of the Capital cost quoted would be paid on completion of construction while the remaining 60% of the cost will be paid over the life of the project as annuities along with operation and maintenance cost (O&M) expenses.

One of the most important features of this model is that both the Annuity and O&M payments are linked to the performance of the STP. This will ensure continued performance of the assets created due to better accountability, ownership and optimal performance.

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