Government to cap allocations for annuity payments for public-private partnership projects

The government proposes to put a cap on budgetary allocations for annuity payments for the public-private partnership (PPP) projects to do away the burden on future budgets. The proposal is expected to be placed before the Cabinet Committee on Economic Affairs (CCEA) tomorrow, a source in the government said.

Annuity charge is the periodic payment government makes to the concessionaire for financing, construction, operation and maintenance of a PPP project.

The government is of the view that annuity payments under PPP projects create a burden on future budgets for a long period of time, making future budgets become inflexible and committed, a source said.

"It is, therefore, necessary to prescribe a suitable cap upto which future budgetary options can be foreclosed for meeting present capital expenditure," the source added.

Annuity payments are typically borne by the government out of the annual budgetary allocations spread over time and are essentially in the nature of deferred budgetary payments.

Annuity-based projects, unlike the projects sustained by user charges, do not have a revenue stream of their own and essentially, rely on payments out of budgetary allocations over the years.

The government, however, may continue with the existing annuity ceiling for Ministry of Road Transport and Highways projects which is governed by the decisions of an Empowered Group of Ministers (EGoM).

"It is suggested that the annuity ceiling for the Ministry of Road Transport and Highways may continue to be governed by the decisions of EGoM with such modifications as they may wish to make from time to time," the source said.