economics medium MCQ

In the context of Public-Private Partnerships (PPP) in Indian highway construction, what does the 'HAM' (Hybrid Annuity Model) primarily aim to achieve?

  1. Transferring 100% of the traffic and revenue risk to the private developer
  2. Eliminating the role of the government entirely in project financing
  3. Sharing the financial risk by having the government fund 40% of the project cost upfront and the developer arranging the remaining 60%
  4. 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.

Topic Indian Economy - Infrastructure
Exam Relevance UPSC Prelims, SSC CGL
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