HAM is a major public-private partnership model under which the authority pays 40 per cent of a project’s cost upfront, while the balance is released through annuities with interest. The revised framework is intended to reduce litigation and prevent abrupt abandonment of projects by creating a structured transition process.
The substitution provision can be invoked in three situations. These include an uncured authority default, such as delays in providing land or clearances; the concessionaire’s failure to infuse equity or mobilise resources; and a request by the concessionaire to exit after the commercial operations date.
The revised MCA also introduces local content requirements aligned with regulations issued by the Department for Promotion of Industry and Internal Trade under the commerce ministry. It sets out a payment formula for delays attributable to the authority, including the National Highways Authority of India (NHAI). A prolongation cost will be calculated at 8 per cent of the value of incomplete work for the period of delay.
The framework is intended to replace discretionary assessments of delay-related damages with a clearer compensation mechanism. However, the government has retained its decision to avoid arbitration in HAM contracts, a position that has faced opposition from developers. The agreement also adds conditions for ownership changes, including the absence of termination or damages notices and lender approval. Although these requirements codify the approval process, sector participants remain concerned that NHAI approvals, which can take more than 10 months, could continue to create uncertainty and bureaucratic delays in ownership transactions.