Annuity model
Also called: Annuity-based PPP · Topic: Infrastructure: Transport, Communications and Energy · NCERT: Beyond NCERT
Meaning
The annuity model is a way of paying a private developer in a public-private partnership (PPP). The government pays the developer fixed amounts at regular intervals. These payments are called annuities. The developer does not collect tolls or user charges. Any tolls go to the government, so the government bears traffic risk (the risk that fewer vehicles use the road than expected). The developer only has to build the asset on time and keep it in good condition.
Example
Under NHAI's hybrid annuity model, the developer puts in 60% of the project cost. It gets this money back as annuities, with interest, over about 15 years. It also receives payments for operation and maintenance. Tolls go to NHAI.
Don't confuse with
- BOT-Toll: here the developer earns by collecting tolls, so it bears the traffic risk.
Related concepts
- Public-private partnership
- Concession agreement
- Engineering, procurement and construction
- Hybrid annuity model
- BOT-Annuity
- BOT-Toll
- Build-operate-transfer
- Build-own-operate-transfer
- Build-own-operate
- Build-own-lease-transfer