Government approves Hybrid Annuity Model for future Highway Projects

Cabinet has approved the next big reform for rejuvenating the PPP in infrastructure –the Hybrid Annuity Model (HAM). The new model which assures more financial involvement for the government and takes away the burden of toll collection from the private party is supposed to take a main place in the next budget.

Compared to the existing toll based variants, newly shaped Hybrid Annuity Model has more sharing of financial burden by the government during the project time.

Few weeks back, the Kelkar Committee has suggested restructuring of the PPP model including the extension of HAM for road projects. The HAM is already introduced with varied features for a number of projects under the Ministry of Road Transport and Railways.

Under the HAM ratified by the Cabinet, project cost will be shared by the concessionaire (private firm who undertakes the project) and the government in 60:40 ratio. Government’s 40% contribution will be completed during project construction phase. The remaining 60% amount will be repaid to the private developer in annuity basis with interests.

More importantly, the burden of collecting revenues will not be put on the private firm under the new arrangement as the NHAI will collect tolls.

The PPP model in the country was on a stand still as many projects were facing hurdles including public opposition to toll collection, land acquisition delays, slow approvals etc. The concept of PPP itself was in bad weather over the last six years bringing down infrastructure generation in the country.  Government’s hope is that HAM will renew interest from private parties.