Telangana’s Rural Road Development Plan Under Scrutiny

■  The Builders Association of India (BAI), Telangana chapter, has urged the government to abandon the HAM model

■  One more grave concern about HAM model is it may turn small and medium contractors into slaves to the big contractors

■  Critics also point to the potential for corruption in the tendering process. 

■  Allegations suggest that tender rules may be manipulated to favor big contractors

Critics argue that the HAM model, if not implemented with transparency and adherence to National Highways Authority of India (NHAI) guidelines, could become a “hammer” on Telangana’s future generations, potentially costing the state thousands of crores in inflated costs

metro india news  I hyderabad

The Telangana government’s ambitious plan to develop over 13,000 kilometers of rural roads under the Hybrid Annuity Model (HAM), as announced by Roads and Buildings Minister Komatireddy Venkat Reddy, has sparked both optimism and apprehension. While the initiative promises to enhance connectivity between rural and urban areas, concerns about inflated estimates, potential corruption, and the long-term financial burden on the state’s exchequer have cast a shadow over the scheme’s viability. Critics argue that the HAM model, if not implemented with transparency and adherence to National Highways Authority of India (NHAI) guidelines, could become a “hammer” on Telangana’s future generations, potentially costing the state thousands of crores in inflated costs.

The HAM model, as outlined by the government, is designed to balance public and private investment in infrastructure. Under this framework, the state funds 40% of the project cost in ten installments, while contractors finance the remaining 60%, to be repaid through annuity payments over 15 years, adjusted for inflation. The first phase of the program includes 5,190 km of Roads and Buildings (R&B) roads at an estimated cost of Rs. 6,478.33 crore and 7,947 km of Panchayat Raj roads costing around Rs. 6,000 crore, with tenders for an additional 6,810 km planned by December. The government has emphasized that no tolls will be imposed on these roads, aiming to improve connectivity and ensure safer, pothole-free travel for the public.

On paper, the HAM scheme appears straightforward and efficient, combining the strengths of the Engineering, Procurement, and Construction (EPC) model with Build-Operate-Transfer (BOT) principles. Minister Reddy has highlighted its potential to deliver high-quality roads swiftly, aligning with the state’s “Telangana’s Rising” vision. Deputy Chief Minister Mallu Bhatti Vikramarka has assured contractors of timely payments, addressing past grievances about unpaid dues that have stalled road repairs. However, beneath the surface, contractors and industry stakeholders are raising red flags about the model’s execution and its socio-economic implications.

One major concern is the potential for inflated project estimates. Sources within the contracting community allege that large contractors, particularly from outside Telangana, may inflate estimates by up to 40% above NHAI-guided rates. By structuring bids to minimize their own equity investment, these contractors could secure high returns—potentially exceeding the 9-10% interest rates the government would pay on direct bank loans—while passing the burden of inflated costs onto the state. Over the 15-year annuity period, this could translate into an additional financial strain running into thousands of crores, a burden that future generations of Telangana taxpayers will bear. A contractor, speaking anonymously, remarked, “It’s better to work in Kabul. The Taliban might kill you directly, but here, delayed payments and skewed tenders kill you silently.”

The Builders Association of India (BAI), Telangana chapter, has urged the government to abandon the HAM model, citing its economic unviability and the risk it poses to small contractors. The association argues that the model favors large corporate players, sidelining local contractors who rely on smaller projects for their livelihood. With HAM packages covering 300–400 km each, only well-funded firms can participate, potentially forcing 120 batch mix plants—each employing 50–200 workers—out of business. The BAI has proposed an alternative constituency-wise road maintenance model, which they claim could achieve similar results at 40% of the cost of HAM projects.

Critics also point to the potential for corruption in the tendering process. Allegations suggest that tender rules may be manipulated to favor big contractors, with organized competition stifling smaller players. The lack of transparency in estimate preparation and bid evaluations could lead to a scam costing the public exchequer over Rs. 10,000 crore, according to industry insiders. These concerns are compounded by Telangana’s precarious financial situation, with the previous Bharat Rashtra Samithi (BRS) government leaving behind a reported Rs. 1.75 lakh crore in committed works and unpaid dues. 

Contractors’ reluctance to bid on recent tenders, due to outstanding payments of Rs. 100 crore for R&B and Rs. 65 crore for Panchayat Raj projects, underscores the trust deficit between the government and the industry.

An alternative to HAM, the EPC model, has been proposed as a more cost-effective solution. Under EPC, the government directly funds projects, borrowing at 9-10% interest from banks, potentially saving billions compared to the high returns demanded by HAM contractors. The BAI and local contractors argue that adhering strictly to NHAI rates and focusing on renewing existing roads rather than large-scale widening could further reduce costs while improving infrastructure. The Pradhan Mantri Gram Sadak Yojana (PMGSY), which integrates construction and maintenance, has been cited as a successful precedent.

As Telangana embarks on this massive road development program, the stakes are high. If implemented transparently with strict adherence to NHAI guidelines, the HAM scheme could transform rural connectivity and drive economic growth. However, without robust oversight, it risks becoming a financial albatross, hammering the state’s economy for decades. The government must address contractors’ concerns, ensure competitive and fair tendering, and prioritize cost efficiency to prevent the HAM scheme from becoming a hammer that crushes Telangana’s fiscal future. The road ahead demands not just ambition but vigilance to protect the public interest. One more grave concern about HAM model is it may turn small and medium contractors into slaves to the big contractors.