Under HAM, NHAI pays 40% of the project cost during the construction period and the remaining 60% as annuity payments over the operations period to the developer; the developer, therefore, needs to find money for the 60% construction cost at the initial stage; but his equity share turns out to be less than 10% in most cases.
Having awarded a record 744 km highway projects for the April-August period, the National Highways Authority of India (NHAI) on Monday said its project awards is likely to exceed the targeted 4,500 km in the current fiscal. “During April to August 2020, NHAI has awarded 26 projects of 744 km length compared to 676 km in FY20, 368 km in FY19 and 504 km in FY18,” NHAI said in a statement.
Sources said a little more than 70% of the projects have been awarded in the engineering, procurement and construction (EPC) route, in which the authority bears all expenses; while the remaining were awarded in the hybrid annuity model (HAM).
Under HAM, NHAI pays 40% of the project cost during the construction period and the remaining 60% as annuity payments over the operations period to the developer; the developer, therefore, needs to find money for the 60% construction cost at the initial stage; but his equity share turns out to be less than 10% in most cases.
Capital cost of these 26 projects is over Rs 31,000 crore, which includes cost of civil construction, land acquisition and other pre-construction activities.
Despite lockdown and prevailing situation, NHAI took various initiatives to instill confidence in the bidders of the sector. In the first quarter of the current fiscal, NHAI disbursed more than Rs 15,000 crore to the vendors.
Additionally, steps such as monthly payments to the contractors were taken. Such moderations saw an encouraged participation from the bidders resulting in spiraling effect on the growth of the road sector, the NHAI said.