On an NHAI hybrid annuity model project, the authority pays only 40% of the bid project cost while the road is being built, in five instalments that fall due at set stages of physical progress. The other 60% reaches the concessionaire as annuities spread over about 15 years after the road opens. Everything built between those payment milestones is funded by the concessionaire’s own equity and bank loans, and that private money is what your hire bills are really waiting on.

By the time a HAM highway is 90% built, the authority has paid for 40% of it. That one number explains what sub-contractors and machine owners below the concessionaire live with on these jobs: long stretches where the work is moving and the money is not.

What the hybrid annuity model means

The Cabinet Committee on Economic Affairs approved the model on 27 January 2016 as one more way to deliver highway projects. The PIB release on the CCEA approval sets out the risk split: the private partner bears construction and maintenance risk as in BOT (Toll) projects, bears financing risk only in part, and is insulated from revenue, traffic and inflation risk.

The exact money terms sit in each concession agreement. The clauses below are from an NHAI concession agreement of April 2018, reproduced by the Madras High Court in K N R Srirangam Infra Pvt Ltd v. State Tax Officer (24 July 2024).

Payment What the April 2018 NHAI agreement says
Construction support 40% of the Bid Project Cost, adjusted for the Price Index Multiple (clause 23.3.1)
How it is released 5 equal instalments of 8% each during the construction period
Payment milestones On achieving 10%, 30%, 50%, 75% and 90% physical progress (clause 23.4)
The balance 30 annuities after the commercial operation date (COD), which the court described as a period of 15 years
Annuity size Each a set share of the amount outstanding at COD, rising from 2.10% for the first to 4.75% for the last two (clause 23.6.3)

The Bid Project Cost is the figure the winning bidder quotes, and the Price Index Multiple adjusts it for inflation. The CBIC’s GST circular of 26 June 2024, quoted in the same order, notes that a HAM contract covers operation and maintenance as well as construction, and that the annuities paid by NHAI include an interest component.

Versions differ. Another annuity concession, for a road in Rajasthan (Nagaur to Mukundgarh), reproduced by the Rajasthan High Court on 17 August 2026, paid 50% during construction and the rest over 10 years, with interest at Bank Rate plus 2% on the reducing balance. Read the clause in the agreement for your own project.

Who pays whom on a HAM project

The winning bidder forms a special purpose company, the concessionaire, which signs with NHAI. The concessionaire usually hands the construction to an EPC contractor, often a company in the promoter’s own group. In the Srirangam order the court noted that the concessionaire “has sub-contracted the work and completed the work in advance for receiving the payments in the form of Annuity over a period of 15 years.”

Below the EPC contractor sit the earthwork and structure sub-contractors, and the owners whose excavators, motor graders and rollers do the work. Who issues your order in that chain is covered in how an EPC contractor hires your machine. What changes on HAM is where the money above the EPC contractor comes from: NHAI’s construction support, the promoter’s equity and the project loan.

When the money actually arrives: a ₹100 crore example

Take an illustrative HAM project with a Bid Project Cost of ₹100 crore (indicative), a flat price index and the April 2018 NHAI percentages:

Stage (illustrative) Work done, by value NHAI money received so far
Physical progress 10% ₹10 crore ₹8 crore
Physical progress 30% ₹30 crore ₹16 crore
Physical progress 50% ₹50 crore ₹24 crore
Physical progress 75% ₹75 crore ₹32 crore
Physical progress 90% ₹90 crore ₹40 crore
First year after COD (two annuities, 4.27% of the ₹60 crore balance) Road open ₹2.56 crore plus interest
First five years after COD (ten annuities, 24.21% of the balance) Road open ₹14.53 crore plus interest

Illustrative only. Figures are indicative and exclude price-index changes, GST and interest; “work done by value” is a stand-in for physical progress, which the contract measures its own way.

Two things stand out. Between 10% and 30% progress, roughly ₹20 crore of work gets done and no NHAI money arrives at all. And by 90% progress, about ₹50 crore of the work has been paid for by equity and loans. The annuities that repay it go to the concessionaire and its lenders, spread over 15 years.

The practical rule follows: on a HAM job, get paid during construction. A hire bill that slips past COD is chasing a concessionaire whose income has just dropped to a few crore a year.

Why financial close matters to you

Financial close is the point at which the project’s loans are signed and the lenders’ money can be drawn. In HAM concessions such as the Maharashtra ones below, it is a condition the concessionaire must meet within a fixed time.

The Bombay High Court dealt with this in PCIL HAM Daund Siddhatek Pvt Ltd v. State of Maharashtra (18 June 2019), on a Maharashtra state HAM road. The concessionaires had not achieved financial closure in time and the state terminated the agreements. The court refused to interfere, holding that every bidder “must be deemed in law to be aware” of “the requirements of financial closure, raising equity, etc.”

Work done before financial close is being paid from the promoter’s pocket alone. If the loan never comes through, the contract can end, and your unpaid bills sit with an EPC contractor whose own client has walked away.

Where HAM payment delays come from

Many delays trace back to the gap between milestones. The concessionaire pays the EPC contractor from equity and loan drawdowns until the next instalment arrives. When either runs short, payments to vendors below the EPC contractor are usually the first to slow.

The milestones themselves have to be certified. In the Nagaur to Mukundgarh concession above, the authority was to pay within 15 days of receiving the Independent Engineer’s report certifying the milestone. A disputed progress figure pushes that report, and the payment, further out.

In a Delhi High Court order of 31 July 2026, a concessionaire on a Bangalore-Chennai Expressway HAM package is shown writing to NHAI in 2025 about its “cash flow problems” at around 55% physical progress, asking for an interest-bearing advance of 2% of the Bid Project Cost. On the five-instalment schedule above, 55% is just past the third milestone and a long way from the fourth.

Once a delay reaches your bill, the remedies, including the MSME route, are in how to recover a contractor payment delay on government work.

Hybrid annuity model vs EPC vs BOT-toll

Model Who funds construction What it means for your bills
EPC The government, as a public-funded contract The contractor is paid through running bills, so your pay follows the authority’s bill cycle
Hybrid annuity model Authority pays part during construction (40% in the April 2018 NHAI agreement); concessionaire funds the rest Money above the EPC contractor arrives in steps; the gaps depend on the concessionaire’s equity and loan
BOT-toll The concessionaire, recovered from toll Fully private money during construction, and the concessionaire carries traffic risk

The work on a HAM site is the same as on an EPC site. The credit risk is different. On EPC you are exposed to the government’s bill cycle. On HAM you are also exposed to the promoter’s balance sheet.

To see which highway packages are being let, and on which model, check the live highway tenders and project opportunities.

What to check before taking a hire order on a HAM project

Ask whether the concessionaire has achieved financial close. A site team will usually know, and a contractor that avoids the question is telling you something.

Ask where physical progress stands against the next payment milestone. A package at 45% heading for the 50% instalment is a safer start for a long hire than one that has just crossed it.

Find out who the EPC contractor is and how it has paid other vendors. A contractor in the promoter’s own group rises and falls with the concessionaire.

Then write your own terms down: the billing cycle, credit days, a guaranteed minimum for idle days, and what happens if work stops. If the order offers an advance, read how a mobilisation advance works before you give a guarantee for it.

Price the wait. If your rate assumes payment in 30 days and the milestone gap means 90, the difference comes out of your margin. Where you are buying a compactor or grader for a HAM package, size the EMI on the slower cycle, and compare equipment finance options that allow for it.

The bottom line

The hybrid annuity model pays the concessionaire 40% of the bid project cost during construction on the April 2018 NHAI terms, at five progress milestones, and the rest as annuities after the road opens. Everything between those milestones runs on private equity and bank loans. For you that means checking financial close and milestone timing before you mobilise, pricing in slower payment, and getting paid before COD.

When you are ready to bid for the next package or offer your machines to one, browse the current highway tenders and project opportunities, and line up equipment finance before the order arrives.

Rates, schemes, specifications and prices change — confirm current terms with the OEM, dealer, bank or insurer before deciding. HAM payment percentages, milestones and interest terms differ between NHAI and state agreements and between versions; confirm the clauses in your project’s concession and your own hire order with the contractor before you mobilise.