By S&S Co. Advocates & Solicitors · Published 30 March 2026 · Informational content, not legal advice: see our disclaimer
The Basic HAM Structure
Under the Hybrid Annuity Model, NHAI (or the relevant state highway authority) typically funds around 40% of the project's construction cost directly during the construction period, with the developer funding and constructing the balance. Once the highway is commissioned, the developer recovers its investment through fixed semi-annual annuity payments over the concession period (typically 15 years), together with interest on the reducing balance of the deferred capital cost, rather than through toll collection.
Why HAM Delinks Traffic Risk
The defining feature of HAM, distinguishing it from a pure BOT (Toll) structure, is that traffic and revenue risk stays with the authority rather than the developer. Annuity payments are fixed and payable on schedule regardless of actual traffic volumes on the completed stretch. This was designed specifically to make road projects bankable in segments where traffic risk had previously made BOT (Toll) financing difficult to secure.
Construction-Period Payment Milestones
During construction, the authority releases its capital grant contribution in tranches linked to physical progress milestones, certified by an independent engineer against the project's implementation schedule. Delay in milestone certification is a frequent source of cash-flow disputes, since a developer's own equity and debt draw-down schedule is typically structured around the assumption that authority tranches will be released on the certified schedule.
Operations-Period Annuity Disputes
Once operational, the most common HAM disputes concern: delayed release of scheduled annuity instalments; disputes over deductions from the annuity for alleged maintenance or performance shortfalls; and disagreement over the interest rate applicable to the deferred capital cost balance, which is typically indexed to a benchmark rate specified in the concession agreement and adjusted periodically.
Change in Scope and Additional Works Under HAM
HAM concession agreements, like other model concession agreements, contain change of scope provisions for authority-directed additional works. But because HAM developers do not carry traffic risk, additional-scope compensation is typically negotiated as a further, separately annuitised payment stream rather than an adjustment to a toll formula.
Frequently Asked Questions
Does a HAM developer bear the risk of low traffic volumes on the completed stretch?
No, under the standard HAM structure, traffic and revenue risk remains with the authority, and annuity payments are fixed and payable on schedule regardless of actual traffic, which is the central feature distinguishing HAM from BOT (Toll) projects.
Can NHAI withhold an annuity instalment for a maintenance shortfall?
Generally only to the extent, and through the mechanism, specified in the concession agreement, typically a defined deduction against a certified maintenance deficiency, rather than withholding the full instalment, and courts have required the deduction to be properly substantiated rather than applied unilaterally.
How is the interest rate on the deferred capital cost balance under HAM typically fixed?
Most HAM concession agreements index this to a specified benchmark rate (historically linked to the bank rate or a similar reference rate) with periodic reset, as set out in the specific concession agreement's payment schedule. The exact mechanism should always be checked against the executed contract rather than assumed.
References & Further Reading
This article references the following statutory provisions. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- Model Concession Agreement for Hybrid Annuity Projects, NHAI.
- Ministry of Road Transport and Highways policy circulars on the Hybrid Annuity Model, as amended.