Hybrid Annuity Mode (HAM) - Engineering, Procurement and Construction (EPC) model - Build-Operate-Transfer (BOT) model

Hybrid Annuity Mode (HAM) - Engineering, Procurement and Construction (EPC) model - Build-Operate-Transfer (BOT) model


Introduction: 

The Hybrid Annuity Mode (HAM) is a public-private partnership (PPP) model used for building highways in India. It combines features of both the Engineering, Procurement and Construction (EPC) model and the Build-Operate-Transfer (BOT) model.

Here’s how it works in simple terms:

  • Cost Sharing:

    • The government pays 40% of the project cost during the construction phase in installments.

    • The remaining 60% is arranged by the private concessionaire (developer) through debt and equity.

  • Risk Sharing:

    • The traffic risk (toll collection risk) is borne by the government.

    • The developer is paid back through fixed semi-annual payments (called annuities) by the government, along with interest on the balance 60%.

  • Revenue Model:

    • Unlike the BOT (Toll) model, where the private party collects tolls and bears the traffic risk, under HAM the government collects tolls and pays the private partner.

    • This ensures stable returns for developers and reduces uncertainty.

  • Why HAM is used:

    • Attracts private investment while reducing risk for investors.

    • Ensures quality construction and timely completion, since developers are guaranteed returns.

    • Useful in regions where traffic volumes (and thus toll revenue) are uncertain.

Comparison of EPC vs BOT vs HAM models used in highway/road projects in India:


Feature

EPC (Engineering, Procurement, Construction)

BOT (Build-Operate-Transfer)

HAM (Hybrid Annuity Mode)

Funding

100% funded by the Government

100% funded by the Private developer (through debt + equity)

40% funded by Government during construction; 60% by Private developer

Risk Bearing

Government bears all risks (construction, traffic, revenue)

Private developer bears construction + traffic/revenue risk

Construction risk borne by Private developer, traffic/revenue risk by Government

Payment to Developer

One-time lump sum payment by Government after project completion

Developer recovers investment through toll collection from users

Government pays back developer in fixed annuities (semi-annual payments) + interest on investment

Toll Collection

Government collects tolls (if applicable)

Private developer collects tolls

Government collects tolls

Private Sector Incentive

Limited (contractor only builds)

High (developer earns tolls based on traffic)

Moderate (assured returns through annuity, no traffic risk)

Suitability

Low traffic areas; projects with social importance

High traffic areas where toll revenue is sustainable

Medium traffic areas where traffic revenue is uncertain

Example

Rural/remote road projects

Delhi–Gurgaon Expressway

Bharatmala projects, like Mokama–Munger section



In short:

  • EPC = Safe for developer, all risk on Government.

  • BOT = High risk–high reward for developer.

  • HAM = Balanced, risk shared between Government and developer.

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