Which of the following statements are correct about the Hybrid Annuity Model (HAM)? 1. HAM is a mix between the Build – Operate – Transfer (BOT) Annuity and the Engineering – Procurement – Construction (EPC) models. 2. It provides for the allocation of risks between the public-private partnership (PPP) members. 3. Under it, the developer enjoys absolute right over toll collection. Select the correct answer using the code given below:

In India, the new Hybrid Annuity Model (HAM) is a mix between Build – Operate – Transfer (BOT) Annuity and the Engineering – Procurement – Construction (EPC) models.

As per the design, the government will contribute to 40% of the project cost in the first five years through, annual payments (annuity). The remaining payment will be made on the basis of the assets created and the performance of the developer.

Here, hybrid annuity means the first 40% payment is made as fixed amount in five equal instalments, whereas the remaining 60% is paid as variable annuity amount after the completion of the project, depending upon the value of assets created.

As the government pays only 40%, during the construction stage, the developer should arrange money for the remaining amount.

Here, he has to raise the remaining 60% in the form of equity or loans.

There is no toll right for the developer. Under HAM, the revenue collection would be the responsibility of the National Highways Authority of India (NHAI).

The advantage of HAM is that it gives enough liquidity to the developer and the financial risk is shared by the government. While the private partner continues to bear the construction and maintenance risks as in the case of BOT (toll) model, he is required only to partly bear the financing risk. The government’s policy is that HAM will be used in stalled projects, where other models are not applicable.