Introduction to Investment Models in Railway Sector
The Ministry of Railways is exploring the adoption of a model akin to the Hybrid Annuity Model (HAM) to boost investment, particularly focusing on concession-based project bidding.
Details of the Hybrid Annuity Model (HAM)
- HAM is widely recognized in the highways sector, led by the National Highways Authority of India (NHAI).
- Under this model:
- 40% of the project cost is paid upfront by the authority.
- The remaining 60% is dispensed over time as annuities.
- Projects become transferable assets during maintenance.
Benefits of HAM
- It is a de-risked public-private partnership (PPP) model enabling more project execution.
- Dispersing payments over 15-20 years provides financial flexibility to tendering agencies.
Challenges of Applying HAM in Railways
- The Indian Railways' complex project nature poses difficulties in adopting HAM compared to highways.
- Safety concerns lead to hesitance in transferring maintenance to private entities.
- Misconceptions about government resource constraints affect decision-making.
Current and Future Plans
- The Ministry is identifying potential projects suitable for HAM.
- Despite challenges, there's a push for large-scale capacity expansion, as stated by Union Railways Minister Ashwini Vaishnaw.
Financial Aspects
- Indian Railways has a significant capital expenditure, with ₹2.52 trillion allocated for 2025-26.
- By September, ₹1.42 trillion (56%) of the budget had already been utilized.
Statistics and Trends
- HAM accounted for 55% of highway projects awarded from FY21 to FY24, with 374 projects covering 16,000 km and exceeding ₹4.03 trillion in Bid Project Cost.
