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The Ministry Of Road Transport And Highways' Hybrid Annuity Model Is Winning Accolades

By Author: pranay
Total Articles: 14

In the year 2016, Honorable Minister for Road Transport & Highways, Shipping and Water Resources, River Development & Ganga Rejuvenation, Shri Nitin Gadkari announced a concept called Hybrid Annuity Model (HAM) for the Highway Projects of India. Ever since, there has been tremendous improvement in the various construction projects of Indian National Highways. The revenue generation and collection from projects under the HAM model will be handled by the National Highways Authority of India (NHAI).

What is HAM?

The Hybrid Annuity Model is a concept introduced by the Ministry of Transportation to restore the Public-Private Partnership (PPP) in highway construction projects, Under the HAM, the Government will only sponsor 40% of the project, while the sponsorship for the remaining will be acquired by auctions, where interested investors can bid on the concerned project. The projects under the HAM are acquired at a rate that is usually 20% higher than NHAI’s estimated project cost, while the interest for deferred payment is just 3%.

The HAM is a combination of the BOT Annuity Model or the Build–Operate–Transfer model, where a private organization conducts a large development project under contract to a public-sector partner, such as a government agency, and the EPC Model, or the Engineering, Procurement, and Construction Model, where the EPC Contractor is made responsible for all the activities from design, procurement, construction, to commissioning and handover of the project to the End-User or Owner.

Since its induction in 2016, the HAM has been bringing along great enhancements in the existing concepts of the highway projects. As of March 2018, there has been a tenfold increase in the awarding of road projects. The total length of the highway projects that have been awarded under HAM is 3396 km, as compared to the previous 345 km.

Currently, the HAM is competing with two other highway project models- the BOT Model and the EPC Model. However, with the recent developments that HAM has brought about, it is safe to say that the HAM is a terrific concept for the advancement of the highway projects throughout the country.
With the HAM in effect, projects worth Rs 75600 crores have been awarded by the NHAI, as compared to previous projects worth Rs 31200 crores. This has definitely helped the Government as well as the investing partners.

Benefits of the HAM:

● With the investors having to sponsor only 60% of the project cost, there is decreased risk involved, given that the entire payment risk is borne by the Government
● The private partner deals with the operation and the maintenance of the project
● Banks lend assured annuity payments

With the introduction of HAM by the MORTH, the highway projects have definitely been seeing fast improvement.

#NHAI #MORTH #HAM #HybridAnnuityModel #WinningAccolades

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