Consider the following statements regarding the Hybrid Annuity Model (HAM):

1. It is a mix of the Engineering, Procurement and Construction (EPC) and Build, Operate, Transfer (BOT) models.

2. All risks i.e. financial, toll collection and operation & maintenance (O&M) is borne by the private sector.

3. Revenue collection would be the responsibility of the National Highways Authority of India (NHAI) and private developers.

Which of the Statements given above is/are Incorrect?

Solution

● Statement 1 is correct: Hybrid Annuity Model (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. Earlier PPP models included EPC (engineering, procurement and construction), where NHAI pays private players to lay roads, and BOT (build, operate, transfer), where private player financed, built and operated projects and got paid through annuity or toll. But both the models were struggling as the government didn't have funds for EPC while private players struggled to raise funds under BOT. Therefore, HAM was introduced in January 2016 to recover investments in road infrastructure projects. ● Statement 2 and 3 are incorrect: In the BOT model all risks i.e. financial, toll collection and operation & maintenance (O&M) are borne by the private sector. These risks put the private sector more vulnerable. In the new HAM model, a realignment of risk sharing is brought in. The private partner continues to bear the O&M risks, but the financing risk is now shared with the government as the government pays 40% during the construction stage The government also shoulders the responsibility of revenue collection as under HAM, Revenue collection would be the responsibility of the National Highways Authority of India (NHAI).There is no toll right for the developer. The private developer will recover his investment from the government by receiving annuity payments over a period of 15 years.