2.7.2. Advantages of this Model

♤ According to industry experts, hybrid model is viable and companies see value in bidding for such projects.

♤ In the hybrid annuity model, one need not bring 100 per cent of finance upfront and since 40 per cent is available during the construction period, only 60 per cent is required to be arranged for the long term.

♤ Moreover, there is no risk of tolling as well as traffic uncertainty.

♤ The National Highways Authority of India (NHAI) will collect toll and refund the amount in installments over a period of 15-20 years, cutting down on upfront investment required to be made by the government.

♤ Developers will start participating in this type of projects, otherwise, the enterprise and lenders have practically no appetite for BOT projects and it should also give impetus to active private sector participation.

♤ Further, 40 per cent grant in form of capital support would substantially reduce the debt portion and interest thereof. The lenders will have a great comfort in financing the project.

♤ Land Acquisition and Environmental clearances: are major sources of delay and stalling of many projects. In HAM model, the obligation to acquire land and environmental clearances lies with the government.

♤ Projects speeded up: Losses due to time overruns are prevented. As government is itself a

stakeholder, it now acts as a real ‘partner’.

♤ Sensible risk and reward sharing

♤ Investment burden shared: Since corporate bank balance sheets are weak, private players cannot bear full capital investment burden. (HAM has 40% investment from govt.)

♤ Higher revenue certainty and reduced risk of developer: In the BOT model, private partner bears the construction and maintenance risks. As Government is going to collect Highway toll tax in HAM, government also bears the risk.

♤ Monitoring mechanism: as government will invest money in five equal installments based on the targeted completion of the road project.

♤ Cost overruns: tackled due to provisions for inflation adjusted project costs.