Question

Q21) Consider the following statements about Hybrid Annuity Model:

1.Both developer and the government shares equal cost of the project.

2. The developer is insulated from revenue/traffic risk and the inflation risk.

Which of the above statements is/are correct?

• A. a) 1 only
• B. b) 2 only
• C. c) Both 1 and 2
• D. d)None

Answer 1

The correct option is B

b) 2 only

Answer 21: B

Explanation: Hybrid Annuity model(HAM) is a new type of public-private partnership (PPP) model.
In this HAM model, the government invests 40 per cent of the construction cost for building highways over a period and the balance
comes from the private developer.
Toll is collected by the government. Fixed payments (annuity) with a profit margin are paid to the
developer.
An important feature of the Hybrid Annuity Model for highways development is the rational approach adopted for allocation of risks
between the PPP partners - the Government and the private partner i.e. the developer/investor. While the private partner continues to
bear the construction and maintenance risks as in BOT (Toll) projects, it is required only to partly bear financing risk. Further, the
developer is insulated from revenue/traffic risk and the inflation risk, which are not within its control.