Hybrid Annuity based PPP – who actually carries the risk?

Hope I am not being too pedantic in questioning the formulation of this Hybrid Annuity based PPPs for the creation of sewerage infrastructure.

The fundamental philosophy of a PPP is that some of the risks (financial or otherwise) associated with an infrastructure project is transferred to a private sector organisation. In theory, the risks inherent in constructing and operating infrastructure are shared between the government and the private party depending on who can best manage those risks.

Looking at the publicly available documentation in relation to the creation of sewage treatment infrastructure under the National Mission for Clean Ganga, the private party (termed Concessionaire) will receive 40% of the capital cost upfront and the remainder plus annual O & M costs over a 20 year period. I hope my interpretation is correct. Correct me if I am wrong.

Therefore, on the face of it, the Concessionaire carries 60% of the financial risk. In reality, is there any risk to the Concessionaire when there is a highly structured repayment schedule in place? They will finance the 60% cost, which is their share via a long-term loan, the cost of which will also be transferred to the Government as part of the repayment schedule.

In other words the Government of India is not really transferring any risks to the private sector! Is there any risk to the Concessionaire?

I personally think that the Concessionaire should have been requested to recoup part of the investment by the sale of treated wastewater and sludge. This would have been a real PPP where the Concessionaire has to take some commercial risks. This is not the case now.

I would classify the current arrangement more as a BOT (Build, Operate, Transfer) rather than a PPP. This is essentially what the Concessionaire is going to do. They will build the infrastructure, operate and maintain it for 20 years and then transfer back to Government.

Maybe I am complaining more about the use of the terminology rather than the mechanism for implementation. Possibly, what has been formulated is what it best for the given situation and to achieve a satisfactory resolution to a major issue.