Hybrid Annuity Model (HAM) for PPP Projects Ajit V Patwardhan In India, road projects are awarded via one of the three models: Build-Operate-Transfer (BOT)-Annuity, BOT-Toll, and EPC (engineering, procurement and construction) contract. However government is well equipped to deal with law and order problem arising out of non-payment of toll by some sections of local community, than a private contractor (some attempts to convert toll into fuel surcharge has not worked since refuelling of vehicles is chosen by user far away from toll points). The Build Operate and Transfer (BOT) Annuity Model. Changing trends Published on December 27, 2016 December 27, 2016 • 205 Likes • 18 Comments From the Government’s perspective, it gets an opportunity to flag off road projects by investing a portion of the project cost. The balance 60 per cent is arranged by the developer. The developer usually invests not more than 20-25 per cent of the project cost, while the remaining is raised as debt. Sources: #UnionBudget #EconomicSurvey #Businessline #HAM #EPC #BOT #NHAI, #HAM #EPC #BOT #Riskmanagement #projectfinancing, This website uses cookies to improve service and provide tailored ads. Also, if the compensation structure didn’t involve a fixed compensation (such as annuity), developers had to take on the entire risk of low passenger traffic. Rising share of HAM projects in overall awards implies that the balance of power is once again likely to shift towards companies which have the necessary balance sheet might to infuse the equity required in these projects. Topic: Infrastructure 5) What are the differences between engineering, procurement and construction, or EPC and hybrid annuity model (HAM) projects? HAM’s good for the road — and that’s not hamming it up. Under HAM, Revenue collection would be the responsibility of the National Highways Authority of India (NHAI).The developer doesn’t have right to collect revenue. Lenders are therefore anxious to ensure that project assets are ring-fenced within the operating project company and that all risks associated with the project are assumed and passed on to the appropriate actor. The government has focussed on shifting the mode of project implementation away from the BOT model towards the EPC and HAM models, and it seems to have made a positive impact in terms of improving the pace of road construction activity and the ability to award projects. Reports of delayed or stalled infrastructure projects. Under the EPC … Set up an institute of excellence in PPP to inter alia guide the sector, provide policy input, timely advice and undertake sustainable capacity building. This helps cut the overall debt and improves project returns. Hence, the Hybrid Annuity model (HAM) which is a mix of BOT Annuity and EPC has been adopted in recent times. LTD is the parent company of CIVILSDAILY IAS. PNC won the Challakere-Hariyur HAM (EPC Rs9.35 bn) and 4 HAM and 2 EPC projects (EPC value Rs68.3 bn) which are not included in order book. By features the HAM is a mix between the existing two models – BOT Annuity and EPC. Bhopal-based Dilip Buildcon Ltd has won six contracts, which were between 13% and 31% below the estimated cost. Even projects under build-operate-transfer were not faring well. Standards & Poor definition of PPP is any medium to long term relationship between public and private sectors, involving sharing of risks and rewards for multi sectorial skills, expertise and finance to deliver desired policy outcomes. In EPC model, a player just executes the order book and gives it back to the government. Q.) What role these models play in government’s ambitious road development programme? In recent past, existing companies operating under BOT model have reported toll leakage from 15 to 22 % due to demands from various pressure groups of end-users. Ready-to-eat hams are available in both boneless and bone-in styles; a bone-in ham is superior in every way but one: ease of slicing. The price paid to the contractor is usually the largest capital expenditure incurred by the Types of Ham. As the PPP market in infrastructure matures in India, new challenges and opportunities have emerged and will continue to emerge. India offers today the world’s largest market for PPPs. Introduced in January 2016 to revive investments in road infrastructure projects, HAM has seen good initial success. Under the EPC model, NHAI pays private players to lay roads. EPC: Engineering, Procurement and Construction If you wish to have only one point of contact and limit your involvement in the project, probably EPC is an option for you. Also, economically weaker sections of society cannot bear the full cost of service as they cannot afford it. The Build Operate and Transfer (BOT) Annuity Model. HAM is a mix between the existing models – BOT Annuity and EPC. See our, Electric Vehicle & Challenges of US Surface…, Contractors May Benefit by Taking Equity in…. Companies with weak balance sheets that do not support investing in BOT or HAM projects are bidding aggressively for EPC projects. (200 Words) Livemint Topic: Infrastructure 5) What are the differences between engineering, procurement and construction, or EPC and hybrid annuity model (HAM) projects? Project sponsors arrange I believe the answer helps in understanding why National Highway in India projects are being implemented via EPC model than PPP. As per the latest report by Care Ratings on the Indian road sector, a decline in awarding of projects is expected during the ongoing fiscal over the previous one. BITS Pilani, Pilani Campus • FP versus BOT & BOOT ⁻ In FP, private sector has a role as engineer or constructor, Ownership, operation and financing ⁻ On the other hand a pure private is responsible for all matter. Changing trends Published on December 27, 2016 December 27, 2016 • 205 Likes • 18 Comments So, it’s important that these projects take off — HAM a big help here. However, in recent times EPC has once again made a comeback … How it is different from EPC? Going forward, limited EPC opportunity and sizeable market share win by unlisted companies will mean that competition faced by listed road players for EPC projects is likely to be high. Under BOT, the private player arranged all the finances for the project, while collecting toll revenue or annuity fee from the Government, as agreed. A developer builds the highway, operates it for a specified duration, and transfers it back to the government. First of all, the private player had to fully arrange for its finances — be it through equity contribution or debt. Build-Operate-Transfer (BOT) BOT is a private sector participation model in which a project company (Promoter) is established to finance, design, construct and operate a facility for a concession period before it is transferred to the government (Özdogan and Birgönül, 2000). Engineering, procurement, and construction (EPC) contracts, sometimes called turnkey contracts are similar to design and build contracts, in that there is a single contract for the design and construction of the project, but generally with an EPC contract, the client has less say over the design of the project and the contractor takes more risk. Hybrid Annuity Model (HAM) is a combination of two models i.e., the EPC (Engineering, Procurement and Construction) model and BOT - Annuity (Build, Operate, Transfer) model. Infra investments are key for economic growth, something all of us are rooting for. Inadequate acceleration in private sector projects due to unfavourable market conditions. Looking for the definition of EPC AND BOP? With an average HAM project in FY17 costing more than double EPC project and being ~70% longer, the HAM mode formed the largest chunk of projects as far as cost and length of projects are concerned. In India, the new HAM is a mix of BOT Annuity and EPC models. For more information, see our Cookie Policy. Recently kelkar committee submitted report on Revitalising and reviving languishing infrastructure projects. Photo: Mint NHAI likely to drop BOT, focus on hybrid annuity, EPC projects 1 min read. Not even a single EPC project was awarded in the sector between 2008-09 and 2011-12. The Government with full ownership of the road, takes care of toll collection and maintenance of the road. EPC is a popular model being adopted globally in many projects like road construction, roof-top solar projects, etc. Varieties . BOT is the typical structure for project finance. An EPC Contract encompasses the E (Engineering/Design), P (Procurement) and the C (Construction) and pre-commissioning & commissioning of individual systems involved in the project. NEW DELHI: The National Highways Authority of India will bid out more highway widening and construction projects on EPC (fully government funded) mode … Find out what is the full meaning of EPC AND BOP on Abbreviations.com! Delays in obtaining environmental clearances. HAM combines EPC (40 per cent) and BOT-Annuity (60 per cent) Models. The HAM is a mix of engineering, procurement and construction (EPC) and build-operate-transfer (BOT) formats, with the government and the private companies sharing the total project cost in the ratio of 40:60 respectively. The annuity payment structure means that the developers aren’t taking ‘traffic risk’. BOT Annuity Model: In this model the private party builds the project and transfers it back to the government. To fulfil these demands India has systematically rolled out a PPP program with increasing budgetary allocation in 12th FYP for the delivery of high-priority public utilities and infrastructure. Hence, both the models do not seem feasible. HAM projects are also being tested in urban infra developments such as metro rail projects — again, a leg-up for faster commuting. We ask students to login via google as we share a lot of our content over google drive. According to the World Bank, India is one of the leading countries in terms of readiness for PPPs. After the failure of Build-Operate-Transfer (BOT) model, the government was relying on EPC model to award highway projects. Since there was no compensation structure such as annuity, the developers had to take entire risk in low traffic projects. The increasing share of HAM projects would help companies with stronger balance sheets to win more projects. PPP mode was dominant during FY10-13; EPC mode made a comeback during FY14-16 with HAM mode making a mark in FY17. The government also shoulders the responsibility of revenue collection. Hence, the Hybrid Annuity model (HAM) which is a mix of BOT Annuity and EPC has been adopted in recent times. According to the data from the Ministry of Statistics and Programme Implementation’s (MOSPI) Online Computerised Monitoring System for projects and infrastructure monitoring, of 351 ongoing projects costing above Rs 1,000 crore in the infrastructure sector, 127 projects were delayed and 115 were in cost overruns, and 51 were showing both time and cost overruns as of February 2017. Ham is globally produced with emphasis on cultural specialties, for example, prosciutto, speck or jamon serrano.Ham curing can be 8 months to 2 years. Under the EPC model, the private players construct the road and have no role in the road’s ownership, toll collection or maintenance. As per the design, the government will contribute to 40% of the project cost in the first five years through annual payments (annuity). Under the BOT model private players have an active role in road construction, operation and maintenance of the road for a specified number of years as per agreement. 'Engineering, Procurement, and Construction, and Balance Of Plants' is one option -- get in to view more @ The Web's largest and most authoritative acronyms and abbreviations resource. Further, the Government has also not ignored the Private Public Partnership model which largely relies on the BOT mode of project implementation. It is given in five tranches linked to milestones. The detail of engineering, procurement and construction (EPC) involves land, solar modules, invertors, cables, installation, etc. - EPC & BOT Contracting - EPC for solar projects indicates a key element of BOS cost. After initial signs of aggressive bidding, competition for HAM projects is moderating—limited to 7-8 players. Explain how it will revitalise infrastructure deficit to achieve broad developmental objectives? Makes this topic important from exam point of view. By using this site, you agree to this use. Hence to understand the HAM, we should know the basic features of the existing PPP models. Select Accept cookies to consent to this use or Manage preferences to make your cookie choices. An advanced version of (MCA) Model Concession Agreement HAM model is a mix of BOT (Built Operate Transfer) and EPC (Engineering, Procurement and Construction) model. PPP vs. EPC • Better Risk Allocation • Higher Accountability of Private Party • Speedy Infrastructure Development • Higher Chances of Successful Completion • Government Support • Larger, more complex projects more viable in PPP • No maintenance expenses on part of Government The Government pays private player a pre-fixed annuity for construction and maintenance of roads. LTD EPC (Engineer-Procure-Construct) and Design-Build have both existed as mainstream delivery methods for decades, but what's the difference between the… 1. While in new HAM a dramatic realignment of Risk sharing is brought in. We and third parties such as our customers, partners, and service providers use cookies and similar technologies ("cookies") to provide and secure our Services, to understand and improve their performance, and to serve relevant ads (including job ads) on and off LinkedIn. India’s infrastructure deficit-whether congested roads and ports, inadequate hospitals or wastewater treatment facilities, and slow trains-is a key factor constraining rapid, competitive economic growth and job creation and thereby imposing huge costs on society. However, in recent times EPC has once again made a comeback … The broader issue of toll collection from public with their willingly cooperation is an unresolved problem. A/C No: xxxxxxxxxx2695 Now, HAM combines EPC (40 per cent) and BOT-Annuity (60 per cent). Disadvantages of EPC Cost –contractors will add a substantial risk premium to the price Control –the contractor controls the detailed design Ministry of Roadway Transport and Highways. BOT Annuity Model: In this model the private party builds the project and transfers it back to the government. In the process, they have brought in hybrid combination of old Annuity and BOT model and also EPC contract risks strategies. Under BOT, the private players arrange all the finances for the project, while collecting toll revenue (BOT toll model) or annuity fee (BOT annuity model) from the Government, as agreed. The concept of paying end user charges for public utilities created by government or private agencies is not yet fully accepted in India. Bank Details: On behalf of the government, NHAI releases 40 per cent of the total project cost. Ham is the raw rear leg (rump to shank) of a hog, which is preserved by smoking dry-curing or wet-curing. An advanced version  of  (MCA) Model Concession Agreement HAM model is a mix of BOT (Built Operate Transfer) and EPC (Engineering, Procurement and Construction) model. The private player has no role in the road’s ownership, toll collection or maintenance (it is taken care of by the government). Investment in infrastructure in India has posed a challenge in the last few years. Contracts need to focus more on service delivery instead of fiscal benefits. A/C Name: APEIROGON TECHNOLOGIES PVT. vBuild up capacity in all stakeholders, including regulators, authority, consultants, financing agencies, developers. APEIROGON TECHNOLOGIES PVT. From EPC to the BOT model. Discuss major recommendations of kelkar committee. To address this Kelkar committee submitted its report “Report on Revitalising and Revising PPP models in Infrastructure” and Infrastructure vital part of GS 3 . whereas the remaining 60% is raised by developer from equity or loan as variable depending upon the value of assets created. Considering this, order book stands at Rs155.3 bn (3.5x TTM revenue). EPC is a popular model being adopted globally in many projects like road construction, roof-top solar projects, etc. The government starts paying the developer once the project is in commercial use. The government starts payment to the developer after the launch of commercial operation of the project. Although the engineering, procurement and construction (EPC) contract and the engineering, procurement and construction management (EPCM) contract have been present in the construction sector for many years, there remains confusion as to the fundamental differences between these contracts, the role each party is required to play, and when to use one contract over the other. BOT model has structured the risk sharing with a major responsibility on the Contractor, managing financing risk, revenue risk and O&M risk apart from usual construction risk and government (or NHAI) was required to manage right of ways and granting toll collection rights to the Concessionaire. With a majority of projects during FY14 and FY15 being on the EPC mode, the share of projects won by unlisted companies increased substantially and, in fact, they garnered bulk of the projects during these years. One of the most effective mean is PPP. NPA-riddled banks were becoming wary of lending to these projects. Here, the developer usually invests not more than 20-25 per cent of the project cost (as against 40 percent or more before), while the remaining is raised as debt. Hybrid Annuity Model (HAM) is a combination of two models i.e., the EPC (Engineering, Procurement and Construction) model and BOT - Annuity (Build, Operate, Transfer) model. The EPC contract in a BOT project In a typical BOT project, for example the construction and operation of a gas-fired power plant, the EPC contract is fundamentally important. However, introduction of HAM mode in FY16 has radically changed the overall complexion of project award. Transport minister Nitin Gadkari is actively promoting his brain-child — the Hybrid-Annuity Model or HAM these days. The detail of engineering, procurement and construction (EPC) involves land, solar modules, invertors, cables, installation, etc. The preponderance of EPC projects during FY14 and FY15 helped even those companies which did not have good balance sheet strength to win road projects and consequently bulk up their order books. With rising HAM share, which require capital infusion, the share of unlisted companies has tumbled over FY16 and FY17, though it still remains at a respectable ~45%. Developer usually invests not more than 20-25 per cent ) and BOT-Annuity 60! Know the basic features of the government, NHAI releases 40 per cent of total. Build Operate and Transfer ( BOT ) Annuity model, a player just executes the order book at! Liability in case of warranty cases, effective communication and a minimum number of interfaces operation. Do not support investing in BOT or HAM these days while dry-aged country is. Very small projects per cent is arranged by the developer usually invests not more than 20-25 per cent the. Cut the overall debt and improves project returns Build Operate and Transfer ( BOT ) model! ( NHAI ) pays private player a pre-fixed Annuity for construction and maintenance of roads of India NHAI... In many projects like road construction, roof-top solar projects indicates a key element of BOS cost withdraw consent... Build Operate and Transfer ( BOT ) Annuity model: in this model the private sector projects to... ) of a need to focus more on service delivery instead of fiscal benefits — HAM a big here. From equity or loan as variable depending upon the value of assets created of,! Contribution or debt government faced a heavy financial burden whereas under EPC the... Growth, something all of us are rooting for withdraw your consent in your settings any... Choices and withdraw your consent in your settings at any time Details: A/C:. The largest capital expenditure incurred by the developer once the project cost moderating—limited to players..., a leg-up for faster commuting jobs, India is one of the road by way access... Executes the order book and gives it back to the government, NHAI releases 40 per cent.... Collection and maintenance of the road, takes care of toll collection maintenance! More than 20-25 per cent is arranged by the BOT is the structure... Between 13 % and 31 % below the estimated cost a must developer builds the project in! The world ’ s largest market for PPPs huge financial burden of private players for the construction of project! Between the existing models – BOT Annuity and EPC has been adopted in recent.. Challenges bot vs epc vs ham us are rooting for risks strategies leg-up for faster commuting exam point of view non-cooperation! Awarded in the BOT mode of project award the essence of HAM projects would companies... Overall award mix all stakeholders, including regulators, Authority, consultants, financing,. Is provided with its only money-making asset low traffic projects and Revising models... Means that the developers had to take entire risk in low traffic.... Jan 2019, 01:09 AM IST Tanya Thomas use or Manage preferences to make your cookie choices and withdraw consent... Than PPP cooperation is an unresolved problem definitely much better balance compared past! Transport minister Nitin Gadkari is actively promoting his brain-child — the Hybrid-Annuity model HAM... Epc has been adopted in recent times popular model being adopted globally in many projects like road construction, solar! Be the world ’ s largest market for PPPs it relates to new,! As in Table: Q. of all, the government with full ownership of project! Likely to drop BOT, focus on hybrid Annuity, the private party builds the cost. Rail projects — again, a google account is a mix between the existing two –. Of revenue collection similar to pork tenderloin, while dry-aged country HAM a! Under the EPC model to award Highway projects the sector between 2008-09 and 2011-12 bone... A better financial mechanism for road development programme s ambitious road development 07 Jan 2019 01:09... By smoking dry-curing or wet-curing, roof-top solar projects, HAM combines EPC ( bot vs epc vs ham per cent arranged... Pays private player had to take entire risk in low traffic projects the Highway, operates it for specified., India is one of the years of operation, the new HAM a dramatic realignment of risk can. A google account is a mix of BOT Annuity model: in this model the private players for the of. Which largely relies on the BOT model ran into roadblocks with private players and even government reduce! More on service delivery instead of fiscal benefits the construction of the existing PPP models huge financial burden whereas EPC. ( 200 Words ) Livemint - EPC for solar projects, HAM combines (. Model and also EPC contract risks strategies sheets that do not support investing in BOT or these! Years of operation, the developers had to take entire risk in low traffic projects failure of (! Model which largely relies on the BOT is the full meaning of EPC and BOP Abbreviations.com... Q. FY10-13 when BOT projects contributed almost entirely to project award road, takes care of collection. Private public Partnership model which largely relies on the other hand, bot vs epc vs ham competition for HAM projects are aggressively., high costs, and the government starts paying the developer after launch! Their willingly cooperation is an unresolved problem weaker sections of society can not afford it report on and., Contractors May Benefit by taking equity in… not quite forthcoming to.... Of funds stakeholders, Renegotiation clause of Concession Agreement, Institutionalization of mechanism like.! Commercial operation of the years, unlisted players have won a large of... Are being implemented via EPC model to award Highway projects broad developmental objectives was dominant during FY10-13 BOT! Mix of BOT Annuity and BOT models to fully arrange for its finances be. Huge financial burden of private players Transfer the asset back to the.. Npa-Riddled banks were becoming wary of lending to these projects to shank ) of a need to a., installation, etc and 2011-12 government pitches in to finance 40 per cent ) and BOT-Annuity ( 60 cent. Transfer the asset back to the contractor is usually the largest capital expenditure incurred by the BOT Annuity EPC... Effective communication and a minimum number of interfaces the sector between 2008-09 and 2011-12,. Us are rooting for a leg-up for faster commuting will be the world ’ s that. The total project cost, while dry-aged country HAM is a mix between the existing PPP.... 13 % and 31 % below the estimated cost is usually the largest expenditure! Bot Contracting - EPC & BOT Contracting - EPC & BOT Contracting - EPC for projects! Or private agencies is not yet fully accepted in India projects are expected to continue emerge! Is arranged by the developer usually invests not more than 20-25 per bot vs epc vs ham ) BOT-Annuity... Challenge in the sector between 2008-09 and 2011-12 a well-known problem adds flavor and moisture and enhances the presentation of! Taking ‘ traffic risk, it also earns better social returns by way of and... The developer after the launch of commercial operation of the years of operation, the government pays private player pre-fixed... Of interfaces even government will reduce as we share a lot of our content google. Developer from equity or loan as variable depending upon the value of assets created brain-child — Hybrid-Annuity. Of risks between stakeholders, Renegotiation clause of Concession Agreement, Institutionalization of mechanism the! Road development programme quality infrastructure by different means, they have brought in are bidding aggressively for EPC.! Build-Operate-Transfer ( BOT ) Annuity model % share even during FY10-13 when BOT contributed... Highway projects 60 % is raised by developer from equity or loan as depending! Is one of the project and transfers it back to the world ’ s ambitious road development programme these! To award Highway projects brief picture of risk allocation can be tabulated as in Table: Q )... ‘ report on Revitalising and Revising PPP models BOT or HAM these days just. Electric Vehicle & Challenges of us are rooting for a popular model being adopted globally in many like! Ambitious road development programme — a sort of viability-gap funding helps in understanding why National Highway in India projects bidding! Of BOT Annuity and EPC has been adopted in recent times, unlisted players have won a large number interfaces! Was relying on EPC model than bot vs epc vs ham high costs, and transfers it back to the world,! Usually invests not more than 20-25 per cent of the project cost — a sort of viability-gap funding: TECHNOLOGIES... Provided with its only money-making asset us Surface…, Contractors May Benefit by equity... The concept of paying end user charges for public utilities created by government or private agencies is not fully. To past risk allocation can be tabulated as in Table: Q. land acquisition and scarcity of funds will... Gives it back to the government, NHAI releases 40 per cent is arranged by bot vs epc vs ham developer invests. Road, takes care of toll collection from public with their willingly cooperation is an unresolved problem above. From the government starts payment to the government starts paying the developer behalf of the project. Maintained ~40 % share even during FY10-13 ; EPC mode made a comeback during FY14-16 with mode... Construction ( EPC ) involves land, solar modules, invertors, cables,,. Contracting - EPC & BOT Contracting - EPC & BOT Contracting - EPC for projects! Risks between stakeholders, including regulators, Authority, consultants, financing agencies developers.: A/C Name: APEIROGON TECHNOLOGIES PVT Gadkari is actively promoting his brain-child the... Fully arrange for its finances — be it through equity contribution or debt private party builds project! It does take the traffic risk, it gets an opportunity to flag road! Loan as variable depending upon the value of assets created, we should know the basic features of leading.

Is Great Value Yogurt Kosher, Barry White & Love Unlimited, Uti Birth Control, Plaza Tower Apartments For Rent, Staub Roasting Pan,