Slowdown in delivery of projects has been attributed to over regulation, problems in land acquisition and scarcity of funds. 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. Also, economically weaker sections of society cannot bear the full cost of service as they cannot afford it. 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. HAM arose out of a need to have a better financial mechanism for road development. What role these models play in government’s ambitious road development programme? 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. By using this site, you agree to this use. Examine the features of HAM model? While in new HAM a dramatic realignment of Risk sharing is brought in. It has been three years since HAM was brought in as EPC projects faced significant delays and cost escalation, which hurt the margins of road developers. The detail of engineering, procurement and construction (EPC) involves land, solar modules, invertors, cables, installation, etc. LTD Over the years, unlisted players have won a large number of NHAI projects. Even projects under build-operate-transfer were not faring well. A/C No: xxxxxxxxxx2695 On behalf of the government, NHAI releases 40 per cent of the total project cost. This should result in lucrative IRRs for financially strong players. On the other hand, limited competition for HAM projects is likely to result in lucrative IRRs. After a slow start in FY16, HAM project award gathered steam in FY17—the number of awarded in FY17 was almost equal to EPC projects. India offers today the world’s largest market for PPPs. Rapid Urbanisation, increase in per capita income and high industrial growth led demand for basic infrastructure such as water supply and sanitation, seamless transportation and energy. 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. First of all, the private player had to fully arrange for its finances — be it through equity contribution or debt. Kelkar ‘ Report on Revitalising and Revising PPP models in Infrastructure’. However, in recent times EPC has once again made a comeback … It is the means by which the project is provided with its only money-making asset. 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. For more information, see our Cookie Policy. 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. lack of appetite for fresh investment by promoters and. This helps cut the overall debt and improves project returns. The government starts paying the … IASToppers.com is the premier, authenticated and the fastest growing online educational portal exclusively dedicated to aspirants preparing for UPSC Civil … The Build Operate and Transfer (BOT) Annuity Model. Discuss major recommendations of kelkar committee. APEIROGON TECHNOLOGIES PVT. It means consolidated liability in case of warranty cases, effective communication and a minimum number of interfaces. Ham is the raw rear leg (rump to shank) of a hog, which is preserved by smoking dry-curing or wet-curing. What role these models play in government’s ambitious road development programme? From the Government’s perspective, it gets an opportunity to flag off road projects by investing a portion of the project cost. EPC procurement is widely used and understood and is the most "bankable" procurement method EPC and EPCM Procurement - Issues for Owners 7. HAM combines EPC (40 per cent) and BOT-Annuity (60 per cent) Models. Reports of delayed or stalled infrastructure projects. 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. 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. 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. According to the World Bank, India is one of the leading countries in terms of readiness for PPPs. Companies with weak balance sheets that do not support investing in BOT or HAM projects are bidding aggressively for EPC projects. 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. whereas the remaining 60% is raised by developer from equity or loan as variable depending upon the value of assets created. Changing trends Published on December 27, 2016 December 27, 2016 • 205 Likes • 18 Comments BOT Annuity Model: In this model the private party builds the project and transfers it back to the government. The bone adds flavor and moisture and enhances the presentation. 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. The HAM model is a mix of pure EPC and BOT models. How it is different from EPC? The annuity payment structure means that the developers aren’t taking ‘traffic risk’. 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 Ministry of Roadway Transport and Highways. However, introduction of HAM mode in FY16 has radically changed the overall complexion of project award. NPA-riddled banks were reluctant to lend to these projects. Bank Details: 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. The broader issue of toll collection from public with their willingly cooperation is an unresolved problem. Contracts need to focus more on service delivery instead of fiscal benefits. 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. PPP mode was dominant during FY10-13; EPC mode made a comeback during FY14-16 with HAM mode making a mark in FY17. It means consolidated liability in case of warranty cases, effective communication and a minimum number of interfaces. EPC is a popular model being adopted globally in many projects like road construction, roof-top solar projects, etc. See our, Electric Vehicle & Challenges of US Surface…, Contractors May Benefit by Taking Equity in…. 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. 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. 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. Investment in infrastructure in India has posed a challenge in the last few years. 1. 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. We ask students to login via google as we share a lot of our content over google drive. Find out what is the full meaning of EPC AND BOP on Abbreviations.com! Sources: #UnionBudget #EconomicSurvey #Businessline #HAM #EPC #BOT #NHAI, #HAM #EPC #BOT #Riskmanagement #projectfinancing, This website uses cookies to improve service and provide tailored ads. Further, the Government has also not ignored the Private Public Partnership model which largely relies on the BOT mode of project implementation. 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. To address this Kelkar committee submitted its report “Report on Revitalising and Revising PPP models in Infrastructure” and Infrastructure vital part of GS 3 . Explain how it will revitalise infrastructure deficit to achieve broad developmental objectives? - EPC & BOT Contracting - EPC for solar projects indicates a key element of BOS cost. This indicates that they have the ability to compete with listed companies which are generally considered to be better funded compared to their unlisted peers. 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. Q.) They had maintained ~40% share even during FY10-13 when BOT projects contributed almost entirely to project award. 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. ENN shares global EPC resources to deliver a sound project schedule, quality and BOS cost, offering a solid ROI within the financial framework. Topic: Infrastructure 5) What are the differences between engineering, procurement and construction, or EPC and hybrid annuity model (HAM) projects? On behalf of the Government, NHAI releases 40 per cent of the total project cost, in five tranches linked to milestones. As per the design, the government will contribute to 40% of the project cost in the first five years through annual payments (annuity). Infra investments are key for economic growth, something all of us are rooting for. Transport minister Nitin Gadkari is actively promoting his brain-child — the Hybrid-Annuity Model or HAM these days. In EPC model, a player just executes the order book and gives it back to the government. So, it’s important that these projects take off — HAM a big help here. “Engineering, Procurement, and Construction” EPC is a particular form of contracting arrangement used in some industries where the EPC Contractor is made responsible for all the activities from design, procurement, construction, to commissioning and handover of the project to the End-User or Owner. Under the EPC model, NHAI pays private players to lay roads. In the process, they have brought in hybrid combination of old Annuity and BOT model and also EPC contract risks strategies. '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. Examine. Now, HAM combines EPC (40 per cent) and BOT-Annuity (60 per cent). PPP structures not to be adopted for very small projects. Topic: Infrastructure 5) What are the differences between engineering, procurement and construction, or EPC and hybrid annuity model (HAM) projects? By features the HAM is a mix between the existing two models – BOT Annuity and EPC. As it relates to new build, there is no revenue stream from the outset. vBuild up capacity in all stakeholders, including regulators, authority, consultants, financing agencies, developers. One of the most effective mean is PPP. In India, the new HAM is a mix of BOT Annuity and EPC models. - EPC & BOT Contracting - EPC for solar projects indicates a key element of BOS cost. Low productivity, poor competitiveness, high costs, and the slow pace of urbanization are some of the consequences of this deficit. The rating agency Crisil expects the awarding of all hybrid annuity model (HAM), EPC and build-operate-transfer (BOT) road projects to moderate to 12,000-13,000 km over fiscals 2020 to 2022 compared with 14,000 km over fiscals 2017 to 2019. It is given in five tranches linked to milestones. 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. The detail of engineering, procurement and construction (EPC) involves land, solar modules, invertors, cables, installation, etc. 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. “Engineering, Procurement, and Construction” EPC is a particular form of contracting arrangement used in some industries where the EPC Contractor is made responsible for all the activities from design, procurement, construction, to commissioning and handover of the project to the End-User or Owner. Partial Funding of Projects: Under HAM, Government provides partial funding of projects which is a middle path when compared to zero funding under BOT and complete funding under EPC. Half the projects awarded in 2016-17 were under HAM. HAM is a mix between the existing models – BOT Annuity and EPC. 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. NPA-riddled banks were becoming wary of lending to these projects. The Build Operate and Transfer (BOT) Annuity Model. Introduced in January 2016 to revive investments in road infrastructure projects, HAM has seen good initial success. The non-cooperation of frequently travelling local people is a well-known problem. While cash flow stress in road companies over FY12-14 had led to the EPC mode making a comeback, gradual improvement in financial health of select developers and introduction of HAM is wooing back road developers to the bidding table. Examine. Apart from L&T and Dilip Buildcon, firms such as PNC Infratech Ltd, Ramky Infrastructure Ltd, Ashoka Buildcon Ltd and GVR Infra Projects Ltd have won EPC road contracts in 2016. We factor inflow of Rs112.2 bn (Rs77.6 bn received)/ Rs70 bn in FY21E/ FY22E vs. management guidance of Rs70 bn in FY21E. The government starts paying the developer once the project is in commercial use. Makes this topic important from exam point of view. Under BOT, the private player arranged all the finances for the project, while collecting toll revenue or annuity fee from the Government, as agreed. 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. Even projects under build-operate-transfer were not faring well. What is EPC? 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. Changing trends Published on December 27, 2016 December 27, 2016 • 205 Likes • 18 Comments (200 Words) Livemint A developer builds the highway, operates it for a specified duration, and transfers it back to the government. 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