News

HYBRID ANNUITY MODEL (HAM)

Written by Talent KAS

Related Topic in KAS Prelims Syllabus:

Economy [Paper-II]: Infrastructure in Indian Economy, Rural and Urban Insfrastructure, Ports, Roads, Airports, Railways

News

  • Asian Development Bank (ADB) and the Government of India signed a $490 million loan for public- private partnership (PPP) project to upgrade about 1,600 km of state highways and major district roads (MDRs) from single-lane to two-lane widths in the state of Madhya Pradesh.
  • An additional $286 million investment will be mobilised through private sector participation under the PPP modality.

About the Project

  • The project will upgrade 750 km of state highways and 850 km of MDRs in Madhya Pradesh to two-lane and all-weather standards with road safety features.
  • It will also develop an e-maintenance system, which can record defects or required maintenance, along with a training program to develop capacity on contract implementation and project finance in the Madhya Pradesh Road Development Corporation.

What is Hybrid Annuity Model (HAM)?

  • HAM is a mix of EPC (engineering, procurement and construction) and BOT (build-operate-transfer).
  • This passes the responsibility of design, implementation, and operation and maintenance obligations to the private sector, while attracting some private sector financing.
  • Under this model, the government will release 60% of the total project cost during construction, to be paid to the concessionaire in tranches linked to completion milestones.
  • The remaining 40% is arranged by the concessionaire in the form of equity and commercial debt.
  • Once the project is completed, the government will repay the concessionaire’s financial investment over 10 years.

About ADB

  • It is a regional development bank established on 19 December 1966, which is headquartered in Manila, Philippines.
  • It envisions a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty in the region.
  • ADB in partnership with member governments, independent specialists and other financial institutions is focused on delivering projects in developing member countries that create economic and development impact.
  • As a multilateral development finance institution, ADB assists its members and partners by providing loans, technical assistance, grants, and equity investments to promote social and economic development.
  • ADB is composed of 68 members, 49 of which are from the Asia and Pacific region.
  • Although the majority of the Bank’s members are from the Asia-Pacific region, the industrialized nations are also well-represented.
  • Top 5 shareholders in ADB are: Japan (15.6%), United States (15.6%), China (6.4%), India (6.3%) and Australia (5.8%)
  • India was a founding member of ADB, but operations in the country began only in 1986, when India opted to become a borrowing member.\
[Source: PIB]

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