Transport ministry is promoting the Hybrid-Annuity Model
What is HAM?
HAM is a mix of the Engineering, Procurement and Construction (EPC) and Build, Operate, Transfer(BOT) models.
HAM combines 40% EPC and 60% BOT-Annuity.
It was introduced in January 2016 to recover investments in road infrastructure projects
About 30 highways projects have been awarded under HAM by the National Highway Authority of India (NHAI).
How it works?
Under the EPC model, NHAI pays private players to lay roads.
The private player has no role in the road’s ownership, toll collection or maintenance.
Under the BOT model, private players have an active role.
They build, operate and maintain the road for a specified number of years, before transferring the asset back to the government.
The toll revenue collection arrangement is known as BOT-Annuity.
Essentially, the toll revenue risk is taken by the government, while the private player is paid a pre-fixed annuity for construction and maintenance of roads.
What is its significance?
It helped to have a better financial mechanism for road development.
It is a good trade-off, spreading the risk between developers and the Government.
This helps cut the overall debt and improves project returns.
The annuity payment structure means that the developers aren’t taking ‘traffic risk’, that is they are not depending on the toll traffic alone for their returns.
From the Government’s perspective, it gets an opportunity to flag off road projects by investing a portion of the project cost.
