Hybrid Annuity Model (HAM)
Indian Economy
- PYQs8
- Articles1
Background
Understanding innovative financing models for infrastructure, their advantages in attracting private investment, risk allocation, and impact on public debt and project execution is vital for economic governance topics.
The Hybrid Annuity Model (HAM) is a Public-Private Partnership (PPP) model for infrastructure projects, primarily in the highway sector, that combines features of both Engineering, Procurement, and Construction (EPC) and Build-Operate-Transfer (BOT) models, aiming to balance risk between the government and private developers.
Facts & tables
- Government Contribution
- Government pays 40% of the project cost during the construction phase.
- Private Developer Payment
- The remaining 60% is paid as annuities over the concession period by the government.
- Revenue Risk
- The government bears the traffic and revenue risk, reducing uncertainty for developers.
- Ownership
- Asset ownership typically remains with the government throughout the project lifecycle.
| Type | Reference |
|---|---|
| Conceptual area | Infrastructure Financing |
| Conceptual area | Public-Private Partnership |
| Body | Role |
|---|---|
| National Highways Authority of India (NHAI) | Implements |
Prelims angle
Prelims angle: Multi-statement analysis
Prelims angle: Institutional roles and functions
- PPP model for infrastructure, mainly highways.
- Combines features of EPC and BOT models.
- Government pays 40% during construction, 60% as annuities.
- Government bears traffic/revenue risk.
- Aims to attract private investment by reducing developer risk.
| Year | Framing tags |
|---|---|
| 2025 | Multi-statement analysis, Institutional roles and functions |
| 2025 | Conceptual understanding, Application of economic principles |
| 2025 | Statement-based questions, Conceptual understanding |
| 2023 | Multi-statement analysis, Factual recall |
| 2021 | Conceptual understanding, Cause and effect relationships |
| 2017 | Multi-statement analysis, Factual recall |
| 2016 | Multi-statement analysis, Conceptual understanding |
| 2015 | Conceptual understanding, Policy measures |
Timeline
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Infrastructure Financing
Conceptual area
-
Public-Private Partnership
Conceptual area
-
Prelims 2015
Conceptual understanding, Policy measures
-
Prelims 2016
Multi-statement analysis, Conceptual understanding
-
Prelims 2017
Multi-statement analysis, Factual recall
-
Prelims 2021
Conceptual understanding, Cause and effect relationships
-
Prelims 2023
Multi-statement analysis, Factual recall
-
Prelims 2025
Multi-statement analysis, Institutional roles and functions
-
Prelims 2025
Conceptual understanding, Application of economic principles
-
Prelims 2025
Statement-based questions, Conceptual understanding
-
Bengaluru-Mysuru highway toll hiked again after three months
HAM is a PPP model for highways where the government pays 40% upfront and the rest as annuities, balancing risk and attracting private investment by mitigating revenue risk for developers.
See also
No related topics linked yet.
Past papers
2015–2025 · 5 questions
In the news
Bengaluru-Mysuru highway toll hiked again after three months
HAM is a PPP model for highways where the government pays 40% upfront and the rest as annuities, balancing risk and attracting private investment by mitigating revenue risk for developers.
Try these PYQs
With reference to the Government of India, consider the following information:
| Organization | Some of its Functions | It Works Under |
|--------------------|------------------------|--------------------------------|
| Directorate of Enforcement | Enforcement of the Fugitive Economic Offenders Act, 2018 | Internal Security Division-I, Ministry of Home Affairs |
| Directorate of Revenue Intelligence | Enforces the provisions of the Customs Act, 1962 | Department of Revenue, Ministry of Finance |
| Directorate General of Systems and Data Management | Carrying out big data analytics to assist tax officers for better policy and nabbing tax evaders | Department of Revenue, Ministry of Finance |
In how many of the above rows is the information correctly matched?
The question relates to the correct mapping of key investigative and analytical bodies under the Government of India and their parent ministries or departments. ❌ Row I: Incorrect The Directorate of Enforcement does implement the Fugitive Economic Offenders Act, 2018, but it functions under the Department of Revenue, Ministry of Finance, not the Ministry of Home Affairs. ✅ Row II: Correct The Directorate of Revenue Intelligence (DRI) enforces the Customs Act, 1962 and works under the Department of Revenue, Ministry of Finance. ✅ Row III: Correct The Directorate General of Systems and Data Management aids in big data analytics for tax enforcement and operates under the Department of Revenue, Ministry of Finance.
Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings of ₹10,000 crores and interest payments of ₹6,000 crores. Which of the following statements are correct?
I. Revenue deficit is ₹20,000 crores.
II. Fiscal deficit is ₹10,000 crores.
III. Primary deficit is ₹4,000 crores.
Select the correct answer using the code given below.
Revenue Deficit, Fiscal Deficit, and Primary Deficit are key indicators used to assess a government's financial health. ✅ I. Revenue Deficit = ₹20,000 crores – Correct * Definition: Revenue Deficit = Revenue Expenditure − Revenue Receipts
* Calculation: ₹80,000 crores − ₹60,000 crores = ₹20,000 crores ✅ II. Fiscal Deficit = ₹10,000 crores – Correct * Definition: Fiscal Deficit = Total Expenditure − Total Receipts (excluding borrowings)
* Alternatively, it reflects total borrowings needed to meet the gap
* Given: Borrowings = ₹10,000 crores ⇒ Fiscal Deficit = ₹10,000 crores ✅ III. Primary Deficit = ₹4,000 crores – Correct * Definition: Primary Deficit = Fiscal Deficit − Interest Payments
* Calculation: ₹10,000 crores − ₹6,000 crores = ₹4,000 crores
There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit?
1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalizing subsidies
4. Reducing import duty
Select the correct answer using the code given below.
Actions that can help reduce the deficit: 1. Reducing revenue expenditure (Correct): This involves cutting back on non-essential government spending. Examples include reducing administrative costs, curtailing travel expenses, or postponing discretionary infrastructure projects. 3. Rationalizing subsidies (Correct): This means making subsidies more targeted and efficient. The government can identify and eliminate wasteful subsidies or ensure they reach the intended beneficiaries. Actions that will likely increase the deficit: 2. Introducing new welfare schemes (Incorrect): This would increase government spending and contribute to the deficit. 4. Reducing import duty (Incorrect): Lower import duties can lead to a decrease in government revenue collected from customs duties. This can worsen the deficit. Therefore, the correct answer is 1 and 3 only (Reducing revenue expenditure and Rationalizing subsidies)
There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit?
1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalizing subsidies
4. Expanding industries
Select the correct answer using the code given below.
To reduce a persistent budget deficit, the government can take actions that decrease spending or increase revenue. 1. Reducing revenue expenditure (Correct): This involves cutting back on non-essential government spending. This can include areas like administrative costs, travel, or certain subsidies. 2. Introducing new welfare schemes (Incorrect): This would likely increase government spending and worsen the deficit. 3. Rationalizing subsidies (Correct): Subsidies can be a significant source of government expenditure. Reviewing and potentially reducing or reforming subsidies can help control spending. 4. Expanding industries (Depends): While industrial expansion can lead to increased tax revenue in the long run, it might not have an immediate impact on the budget deficit. In the short term, the government might need to invest in infrastructure to support expansion, potentially increasing expenditure. Therefore, the correct answer is 1 and 3 only (Reducing revenue expenditure and Rationalizing subsidies).
Consider the following statements:
Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable.
Statement-II: InvITs are recognized as borrowers under the 'Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002'.
Which one of the following is correct in respect of the above statements?
* Statement I is Incorrect : Earlier, InvITs offered some tax benefits to investors. However, the budget in 2023 changed the taxation structure. Currently, all income distributed by InvITs, including interest income, dividend income, and rental income, is taxable in the hands of the unitholders according to their income tax slab. * Statement II is Correct : InvITs are indeed recognized as borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). This Act allows InvITs to access various financing options and enforce security interests in case of defaults.
Show 3 more PYQs
Consider the following statements :
1. Tax revenue as a percent of GDP of India has steadily increased in the last decade.
2. Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.
Which of the statements given above is/are correct?
Statement 1 is incorrect: Tax revenue as a percent of GDP in India has not steadily increased over the last decade. It has fluctuated — for instance, it rose during periods of strong economic growth but fell during years like 2019–20 and 2020–21 (due to slowdown and the pandemic). Hence, the trend is not steadily upward. Statement 2 is incorrect: Fiscal deficit as a percent of GDP has also not steadily increased. It narrowed from around 4.5% in 2013–14 to about 3.4% in 2018–19, then spiked during the COVID-19 years (to around 9.2% in 2020–21) and has gradually declined since. Thus, there has been no steady increase over the decade.
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
A. Diversion to Real Estate: While this can happen, it still involves some economic activity and might generate taxes (though potentially not on the full value of the transaction if black money is used). B. Investment in Unproductive Activities: This can hurt the economy, but the government loses tax revenue regardless of the type of investment if it's funded by black money. C. Donations to Political Parties: This is a concern, but the lost tax revenue likely outweighs the impact of such donations. D. Loss of Revenue: Black money, by definition, avoids taxes. This directly reduces the government's income, limiting its ability to fund public services, infrastructure, and social welfare programs. Tax evasion through black money creation significantly hinders the government's ability to function effectively and meet the needs of its citizens. This is why it's a major concern.
Consider the following statements:
I. Capital receipts create a liability or cause a reduction in the assets of the Government.
II. Borrowings and disinvestment are capital receipts.
III. Interest received on loans creates a liability of the Government.
Which of the statements given above are correct?
Capital receipts involve transactions that either increase liabilities or reduce assets for the government. Revenue receipts, on the other hand, are routine incomes like interest or taxes that don’t affect assets or liabilities. ✅ Statement I: Correct
* Capital receipts create liabilities (like borrowings) or reduce assets (like disinvestment). ✅ Statement II: Correct
* Borrowings and disinvestment are both capital receipts. ❌ Statement III: Incorrect
* Interest received is a revenue receipt, not a capital receipt—it’s income, not a liability.