STPs to be constructed under Hybrid Annuity Model

In the first-of-its-kind success, the creation and maintenance of sewage treatment infrastructure under Hybrid Annuity based PPP model has taken off, with NMCG awarding work to the private sector for construction and maintenance of Sewage Treatment Plants (STPs) in two major cities in Ganga river basin – Varanasi and Haridwar. The awarded projects would ensure that no untreated sewage wastewater goes into river Ganga.

Hybrid Annuity based PPP model has been adopted for the first time in the country in sewage management sector. Such a model has earlier been adopted successfully in highway sector only.

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 costs (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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