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Hybrid Annuity Model (HAM) of Hybrid Public-Private Partnership Projects: Contractual, Financing, Tax and Accounting Discussions

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This book analyses several aspects of Hybrid Annuity Model (HAM), a form of hybrid public-private partnership (PPP) for development of roads sector in India. The book covers contractual, financing, taxation and accounting aspects of the HAM based PPP projects in India and provides a complete multi-dimensional view for readers.

It is a comprehensive guide for multiple stakeholders involved in the development of infrastructure projects in developing economies across globe. The book is authored by professionals having hands-on advisory experience for HAM PPP projects in India. Given that these are long-term concession agreements (around 15 years), there are inherent complications and the authors have tried to provide clarity on practical issues.

The book adopts a novel case-study approach. Based on detailed financial and commercial assumptions for a road project in India, the authors have used around 100 numerical illustrations to provide a quantitative and qualitative understanding for readers.

Another highlight of the book is use of international case-studies to provide key learnings in areas of project preparation and structuring for such hybrid PPP models. The risk allocation framework is also contrasted with the HAM PPP model to highlight the key differences. The international case studies have been selected from transport and water sector to illustrate the applicability of hybrid PPPs across multiple sectors to support sustainable infrastructure development.

The target audience for this book include private sector developers, government agencies, deal practitioners, advisors, researchers and academia . This book will also serve as a useful guide for commercial lenders, development finance institutions (DFIs) and institutional investors who are looking to finance such infrastructure projects in the long term.

Author(s): Abhinav Mittal, Puneet Agrawal, Shuchi Agrawal
Series: Management for Professionals
Publisher: Springer
Year: 2023

Language: English
Pages: 287
City: Singapore

Foreword
Preface
Contents
About the Authors
Acronyms
List of Figures
List of Tables
Part IIntroduction
1 Evolution of Hybrid PPPs
1.1 Evolution of Hybrid Annuity Model (HAM) in India
1.2 Key Principals—Hybrid Annuity Model (HAM)
References
2 Hybrid Annuity Model (HAM)—Timeline
2.1 Key Circulars/Notifications
References
Part IIHybrid Annuity Model (HAM) for Roads Sector, India
3 Contractual Structure and Risk Allocation Framework
3.1 Contractual Structure
3.2 Risk Allocation Framework
Reference
4 Success of HAM in the Indian Context
4.1 HAM as Preferred PPP Model
4.2 HAM Projects Awarded—A Quantitative Analysis
4.3 Key Players/Stakeholders
4.4 HAM Projects Awarded—List of Projects
References
5 Project Finance and Secondary Market Transactions
5.1 Project Finance—Introduction
5.1.1 Special Purpose Vehicle (SPV)
5.1.2 Lender Due-Diligence Process
5.2 Financial Close for HAM Based Road PPP Projects in India
5.2.1 The Positives
5.2.2 The Hurdles
5.2.3 Updates to Model Concession Agreement in November 20
5.2.4 Commercial Banks
5.2.5 Development Finance Institutions (DFIs)
5.3 Emerging Trend—Acquisitions/Secondary Market Transactions
5.3.1 Recent Transactions
5.3.2 Profile of Major Investors
Part III360° Review of Hybrid Annuity Model (HAM)
6 Case Study—Project Highway
6.1 Introduction
6.2 Key Assumptions—Project Highway
7 Contract Review—Model Concession Agreement (MCA)
7.1 Model Concession Agreement (MCA)—Introduction
7.2 Development and Operations
7.3 Financial Covenants
7.4 Force Majeure and Termination
7.5 Changes to Model Concession Agreement (MCA)—June 22 Update
7.5.1 Changes in Bidding Process
7.5.2 Changes in O&M Payments
8 Tax Review—Indirect Taxes—GST
8.1 Project Highway Case Study—Summary
8.2 Levy and Exemption of GST
8.2.1 Levy of GST
8.2.2 Exemption from GST
8.3 Taxability of Milestone Payments Received During Construction
8.3.1 Meaning of Works Contract
8.3.2 Composite Supply of Works Contract Treated as Supply of Services
8.3.3 Rate of Tax
8.3.4 Time of Supply in Respect of Milestones Payment Received by Concessionaire
8.3.5 Value of Taxable Supply
8.4 Taxability of Mobilization Advance
8.5 Taxability of Operation and Maintenance Payments
8.5.1 Rate of Tax
8.5.2 Time of Supply
8.6 Taxability of Annuity Payments During Operation Period
8.6.1 Government Notifications and Recommendations of GST Council
8.6.2 Importance/Relevance of Recommendations of GST Council
8.6.3 Case Laws
8.6.4 Taxability of Interest on Annuity Payments During Operations
8.6.5 Later Developments in Respect of the Taxability of Annuity Payments Made by NHAI in Respect of Construction of Road
8.6.6 NHAI Circular Post the 43rd Meeting of GST Council
8.7 Refund on Account of Inverted Duty Structure
8.7.1 Introduction
8.7.2 Construction and Maintenance of Roads—HAM Based PPP Contracts
8.7.3 Notification No. 15/2017-CT(Rate) Dated 28 June 2017
8.7.4 Conclusion
8.7.5 Formula for Claiming Refund of Unutilized ITC in Case of Inverted Duty Structure
9 Tax Review—Direct Tax
9.1 Project Highway Case Study—Summary
9.2 Section 43CB of the IT Act
9.3 Method of Accounting—Section 145 of the IT Act
9.4 Income Computation and Disclosure Standard III (ICDS III)—Construction Contracts
9.4.1 Scope
9.4.2 Combining and Segmenting Construction Contracts
9.5 Meaning of Contract Cost and Contract Revenue
9.5.1 Contract Cost
9.5.2 Contract Revenue
9.5.3 Recognition of Contract Revenue and Expense
9.5.4 Changes in Estimates
9.5.5 Disclosures
9.5.6 Treatment of Borrowing Costs
9.6 Income Computation and Disclosure Standard IV (ICDS IV)—Revenue Recognition
9.6.1 Scope
9.6.2 Recognition of Revenue
9.7 Applicable Rate of Income Tax
9.7.1 Tax Rates
9.7.2 Optional Rate of Tax—Subject to Fulfillment of Conditions
9.7.3 Minimum Alternative Tax
9.7.4 Exercise of Option
10 Accounting Review—Ind AS and Revenue Recognition
10.1 Project Highway Case Study—Summary
10.2 Applicability of Indian Accounting Standards
10.3 Ind AS 115: Revenue from Contracts with Customer
10.3.1 Introduction
10.3.2 Annexure D of Ind AS 115
10.4 Five (5) Step Model for Applying Ind AS 115
10.4.1 Revenue Recognition in Terms of Ind AS 115
10.4.2 Step I: Identify the Contract with the Customer
10.4.3 Step II: Identify the Performance Obligations
10.4.4 Step III: Determine the ‘Transaction Price’
10.4.5 Step IV: Allocate the Transaction Price to the Performance Obligations
10.4.6 Step V: Recognize Revenue as or When Performance Obligations are Satisfied
10.5 Financial Asset—HAM Based PPP Projects
10.5.1 Background
10.5.2 Recognition of Financial Asset
10.5.3 Measurement of Financial Asset
10.6 Contract Asset and Contract Liability—HAM Based PPP Projects
10.6.1 Contract Asset
10.6.2 Contract Liability
Part IVInternational Experience of Hybrid PPPs
11 Success of Hybrid PPPs
11.1 Hybrid PPP approaches
11.2 International Case Studies—Introduction
References
12 Ireland—N1/M1 Dundalk Bypass
12.1 N1/M1 Dundalk Bypass—Project Information
12.1.1 Introduction
12.1.2 Key Features of the Project
12.2 Project Structure
12.3 Risk Allocation
12.4 Key Learnings
References
13 Philippines—Clark International Airport
13.1 Clark International Airport—Project Information
13.1.1 Introduction
13.1.2 Key Features of the Project
13.2 Project Structure
13.3 Risk Allocation
13.4 Key Learnings
References
14 UK—Thames Tideway Tunnel
14.1 Thames Tideway Tunnel—Project Information
14.1.1 Introduction
14.2 Project Structure
14.3 Risk Allocation
14.4 Key Learnings
References