Study of Hybrid Annuity Model on Maharashtra Samruddhi Mahamarg

The recent introduction of Hybrid Annuity Model (HAM) for highway up gradation projects in India marks a significant policy departure. This is aimed at revitalizing private sector led infrastructure development. The model has been pitched as a panacea to the numerous ills plaguing the highway sector, which had led to a record fall in the award of new projects, both in numbers and in value. Taking a dispassionate look, this paper critically examines the extent to which HAM has fulfilled its stated objectives during its introductory stage. The analysis of project award data provides mixed empirical evidence of HAM’s initial success. We find that as a development imperative, HAM does encourage private participation in highway infrastructure, and it is a step forward. However, HAM also suffers from extensive de-risking of the private sector, to the extent of making them unattractive for both debt and equity investment. By this, HAM takes the re-engagement of private sector two steps back. We concede that HAM is still in its infancy and a true performance would only be evident once enough number of projects have been delivered through this model. With this view, this paper adopts a more analytical stance, to identify possible pitfalls based upon the tell-tale signs. This is important as infrastructure projects have a long-life cycle, and an early stage dispassionate analysis and course correction is necessary, lest we move too far down the wrong path. Keywords: Hybrid Annuity Model, Road development, Financial model, Influencing factor