Govt plans to ease norms for HAM model road projects

To make the hybrid annuity model (HAM) model more attractive for the concessionaire, the Union government has planned to make the upfront construction payment support to a highway project concessionaire under the model in 10 tranches against 5, subject to the overall ceiling of 40% of the project cost. The frequenting of the instalments comes in the backdrop of a declining share of the HAM model in the overall highway project awards by the National Highways Authority of India (NHAI). From its peak of 55% in 2016-17, HAM's share in overall projects awards by NHAI fell to just 28% in 2019-20. Frequenting of the instalments will help concessionaires to better manage their working capital requirement. The release of upfront payment during the construction period will be linked to the physical progress of the project. The first payment will be released after 5% of the physical progress is made and the second one after making 10% progress. The last instalment of 40% of the project cost will be disbursed after achieving 90% of the physical progress. Under HAM, the NHAI pays the developer the balance 60% of the project cost as annuity payments over the operations period along with interest thereon. Toll collection from the highway projects developed under the HAM is the responsibility of the authority. The remaining (60%) bid project cost, adjusted for the price index multiple, shall be due and payable in 30 biannual instalments commencing from the 180th day of commercial operation date (COD). Each of the biannual instalments payable shall be paid along with interest, which shall be due and payable on the reducing balance of completion cost at an interest rate equal to the average of one-year MCLR of top five scheduled commercial banks plus 1.25%. Earlier, it was linked to the Reserve Bank of India (RBI) bank rate plus 300 basis points.