What Is the Hybrid Annuity Model?
The Hybrid Annuity Model combines two infrastructure construction models, namely the BOT-Annuity and the EPC. The EPC model comprises 40% of this combination, while the rest, 60%, is BOT-Annuity.
The EPC Model
- The EPC (Engineering, Procurement, and Construction) model denotes a process of infrastructure construction in which the government pays private parties to build roads.
- The responsibility of the private players ends with road construction.
- They are not involved in road maintenance, toll collection, or road ownership. The government remains responsible for these things.
The BOT-Annuity Model
- In the BOT (Build, Operate, Transfer) model of infrastructure construction, the private players are involved for an extended period.
- They deal with constructing, operating, and maintaining the roads for a specific period, suppose 10 to 15 years.
- The roads are then handed back to the government.
- Under the BOT model, the private players have to arrange funds for the project.
- The private players are paid a pre-fixed amount as an annuity for building and maintaining the roads. This annuity fee is known as BOT-Annuity.
- The government bears the risk of toll revenue.
The Hybrid Annuity Model [HAM]
- Under the Hybrid Annuity Model, the National Highways Authority of India (NHAI) pays 40% of the total project expenditure.
- This payment is released in ten equal instalments based on the completion of targeted project milestones.
- The remaining 60% amount has to be arranged by the road developer.
- The developer finances around 20 to 25% of the total project cost. The remaining amount of money is raised as debt.
Source: Hybrid Annuity Model – Meaning, Major Features, Significance
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