No one wants to invest in highway projects? No project awarded under Hybrid Annuity Model this fiscal

There is no one out there to invest in highway projects, except the government. Increased risk aversion among a pool of investors that has anyway been limited, lenders’ chariness, issues related to last-mile land acquisition and cash flow problems of operational projects have all resulted in a drying up of new hybrid annuity model (HAM) projects. Not a single highway project has been awarded under HAM this fiscal, official sources said, sharply down from its 40% share in awards in FY19 (see chart).

Though HAM allows private investors to have very little skin in the game — sub-10% practically —, this has been the sole channel for private investments in the sector in FY17-FY19, after the stress in the sector led to virtual cessation of the BOT-Toll model, where the developer collects tolls to recoup investments and therefore, bears real business risk.