In the context of Public-Private Partnerships (PPP) in Indian highway construction, what does the 'HAM' (Hybrid Annuity Model) primarily aim to achieve?
- Transferring 100% of the traffic and revenue risk to the private developer
- Eliminating the role of the government entirely in project financing
- Sharing the financial risk by having the government fund 40% of the project cost upfront and the developer arranging the remaining 60%
- Allowing the private developer to collect tolls indefinitely without any regulatory caps
Answer: Sharing the financial risk by having the government fund 40% of the project cost upfront and the developer arranging the remaining 60%
The HAM was introduced to revive the stalled PPP sector. Under previous models like BOT-Toll, developers bore all traffic risks, leading to massive defaults. Under HAM, the government provides 40% of the capital as milestone payments, reducing the developer's debt burden, while the developer collects fixed annuity payments from the government post-construction, entirely removing traffic revenue risk.