2.5. EPC MODEL

Highway sector in India is responsible for job creation for millions of people and has a multiplier effect on the economy. Hence government took immediate measures to boost the sector by adopting EPC Model and the acronym stands for Engineering, Procurement and Construction.

Engineering procurement and construction is the new system of private sector participation aimed at overcoming the shortcomings of PPP model. Under EPC model the contractor is legally responsible to complete the project under some fixed predetermined timeline and may also involve scope for penalty in case of time overrun. But the entire cost is borne by the government. In EPC all the clearances, land acquisition and regulatory norms have to be completed by the government itself and the private players do not have to get itself involved in these time taking procedures.

Specifically, in EPC model, 90% land is to be acquired and fund is transferred to the player before the starting of the project. Another set of distinctions are that it is to be completed in a predefined time frame, the risk of the project lies more on the contractors (turnkey project) and unlike PPP, the profit margin is fixed in this case.

In PPP mode of project, operator was liable to build, operate and transfer the project to the government after completion while profit is to be acquired by either annuity paid or by levying toll.