The Bharatmala project would bring to Kerala, for the first time, the Hybrid Annuity Model or HAM.
As the name suggests, HAM is a hybrid, a mix of the Engineering, Procurement and Construction (EPC) and Build, Operate, Transfer (BOT) Annuity models. The HAM model has been introduced to rejuvenate the Public-Private Partnership (PPP) mode. Found successful elsewhere, the National Highways Authority of India (NHAI) has chosen the method to execute the much-delayed 28.4-km Kozhikode National Highway 66 Bypass from Vengalam to Ramanattukara. The State will see the HAM model in operation in the other NH projects to be executed under the Bharatmala Pariyojana, said Lt. Col Ashish Dwivedi, Regional Officer, Kerala, NHAI.
Under the EPC model, the NHAI pays private players to build roads. The private player has no role in the road’s ownership, toll collection or maintenance. In the BOT model, though, the private players build, operate and maintain the road for 10 to 15 years before transferring the asset back to the government. In BOT, the private player should arrange the finances for the project while collecting toll revenue or annuity fee from the government. 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.
The HAM combines EPC (40%) and BOT Annuity (60% ). The NHAI will release 40% of the total project cost in five tranches linked to milestones. The remaining 60% is arranged by the developer. Thus, the developer usually invests 20-25% of the project cost, while the remaining is raised as debt. Under HAM, revenue collection would be the responsibility of the NHAI. After the project is completed, the NHAI will collect toll/user fee from the road users and refund the private players in instalments for 15 to 20 years.
Guarantee of sufficient liquidity to the developer and sharing of the financial risk by the government are cited as the major advantages of the HAM model. Banks and FIs are now showing keen interest in HAM and financial closure of HAM projects are now happening smoothly, says Lt. Col. Dwivedi.
