Highway development: Norms for govt aid to HAM projects eased

By: |
November 11, 2020 8:09 AM

Under HAM, the NHAI pays the developer the balance 60% of the project cost as annuity payments over the operations period along with interest thereon.

Toll fee collection from the highway projects developed under the HAM is the responsibility of the authority.Toll fee collection from the highway projects developed under the HAM is the responsibility of the authority.

The government will now pay the upfront construction payment support to a highway project concessionaire under the hybrid annuity model (HAM) model in 10 tranches against 5, subject to the overall ceiling of 40% of the project cost.

The frequenting of the installments, aimed at making the model more attractive for the concessionaires, comes in the backdrop of declining share of the HAM model in the overall highway project awards by the National Highways Authority of India (NHAI). From its peak of 55% in 2016-17, HAM’s share in overall projects awards by NHAI fell to just 28% in 2019-20. Frequenting of the installments will help concessionaires to better manage their working capital requirement.

The release of upfront payment during the construction period will be linked to the physical progress of the project. First payment will be released after 5% of the physical progress made and the second one after making 10% progress. In the same way, the last installment of 40% of the project cost will be disbursed after achieving 90% of the physical progress.

Under HAM, the NHAI pays the developer the balance 60% of the project cost as annuity payments over the operations period along with interest thereon. Toll fee collection from the highway projects developed under the HAM is the responsibility of the authority.

“The remaining (60%) bid project cost, adjusted for the price index multiple, shall be due and payable in 30 biannual installments commencing from the 180th day of commercial operation date (COD),” it said. Each of the biannual installments payable shall be paid along with interest.

Interest shall be due and payable on the reducing balance of completion cost at an interest rate equal to the average of one-year MCLR of top five scheduled commercial banks plus 1.25%. Earlier, it was linked to the Reserve Bank of India (RBI) bank rate plus 300 basis points.

The authority shall declare the list of top five scheduled commercial banks on September 1 every calendar year based on the balance sheet size. The one-year MCLR of the top five scheduled commercial banks shall be taken at the start of every quarter.

“Instead of providing working capital support in between the payment milestones separately; the spacing between payment milestones itself is now reduced which will improve the working capital cycle of the developers,” said Icra’s Rajeshwar Burla.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Infra boost! PM Modi to inaugurate 6-lane widening project of the Varanasi-Prayagraj section of NH-19; details
2UP to have more national highways! Nitin Gadkari asks state government to expedite land acquisition; details
3L&T to construct India’s longest river bridge; Will connect Assam and Meghalaya across Brahmaputra river