The Union government signed a $490 million loan agreement with the Asian Development Bank on Friday to upgrade 1,600 km of state highways and major district roads in Madhya Pradesh. The project will be implemented under the public-private partnership model to convert single-lane roads into two lanes. An additional investment of $286 million will be raised private partners of the project. Additional secretary, department of economic affairs Sameer Kumar Khare and country director of ADB Kenichi Yokoyama signed the agreement.
The state highways and district roads link rural roads and national highways and better roads will improve rural-urban connectivity and improve access to markets and services, Khare said after signing the agreement. The loan agreement is the continuation of ADB’s support to Madhya Pradesh’s road sector since 2002. The PPP model will help leverage government financing and improve sustainability of investments, Yokoyama said.
The hybrid-annuity model works on build-operate-transfer system. Under the model, the responsibility of designing, implementing, operating and maintaining the roads will be with the private sector. The government will release 60% of the project cost during construction linked to completion milestones. The remaining 40% is arranged by the private party in the form of equity and debt. The government will repay the private partner’s investment over 10 years of the project completion.
The project will upgrade 750 km of state highways and 850 km of major district roads to two-lane all-weather roads and will develop an e-maintenance system that can record required maintenance. The ADB has supported the Madhya Pradesh government to improve 7,300 km roads in the state.