INDIAN INFRASTRUCTURE ON

ROADS

Category of Roads Authorities

responsible

National Highways Central Government (through Ministry of Road Transport and Highways)

State Highways and Major Highways

State Governments (PWDs)

Rural Roads and Urban Roads

Rural Engineering Organisations, Local Authorities like Panchayats and Municipalities

Roads

Introduction

• India has an extensive road network of 4.24 million km– the second largest in the world.

• It is estimated that more than 70 per cent of freight and 85 per cent of passenger traffic in the country is being handled by roads.

• More than 60 percent of the estimated investment requirement is expected to be privately financed.

• The number of vehicles on roads has been growing at compounded annual growth rate (CAGR) of approximately 8%in the last five years

• The National Highways Authority of India (NHAI) is mandated to implement the NHDP.

CURRENT SCENARIO

• The National Highways have a total length of 70,934 km and serve as the arterial road network of the country.

• The development of National Highways is the responsibility of the Government of India.

• The Government of India has launched major initiatives to upgrade and strengthen National Highways through various phases of the National Highways Development Project (NHDP).

• NHDP is one of the largest road development programmes to be undertaken by a single authority in the world and involves widening, upgrading and rehabilitation of about 54,000 km, entailing an estimated investment of more than INR 3,00,000 Crore (USD 60 billion).

Phases

• Phase I mainly involves widening (to 4 lanes) and upgrading of 7,498 km of the national highway network.

• Phase-II involves widening and improvement of the NS-EW corridors covering a distance of 6,647 km.

• NHDP-III involves upgradation of 12,109 km (mainly 4- laning) of high density national highways, through the Build, Operate & Transfer (BOT) mode at a cost of INR 80,626 Crore (USD 16.1 billion).

• NHDP-IV envisages upgrading of 20,000 km of such highways into 2-lane highways, at an indicative cost of INR 27,800 Crore (USD 5.6 billion).

• Under NHDP-V, 6-laning of the 4-lane highways comprising the GQ and certain other high density stretches, will be implemented on BOT basis at an estimated cost of INR 41,210 Crore (USD 8.2 billion).

• Under NHDP-VI, The Government has approved 1,000 km of expressways to be developed on a BOT basis, at an indicative cost of INR 16,680 Crore (USD 3.3 billion).

• Under NHDP-VII, The development of ring roads, bypasses, grade separators and service roads. For this, a programme for development of such features at an indicative cost of INR 16,680 Crore (USD 3.3 billion) has been approved by the Government.

Financing National Highway Projects

1. Government's Gross Budgetary Support (GBS) and Additional Budgetary Support (ABS)

2. Dedicated accruals under the Central Road Fund (share in the levy of cess on fuel)

3. Lending by international institutions (World Bank, ADB, JBIC)

4. Private financing under PPP frameworks5. Market Borrowings (including funds raised through

Capital Gain Tax Exemption Bonds under section 54 EC of Income Tax Act)

Association of State Road Transport Undertakings

PPP in Highway Development

The common forms of PPP that are popular in India and have been used for development of National Highways are:

• Build, Operate and Transfer (Toll) Model on DBFOT basis• Build, Operate and Transfer (Annuity) Mode on DBFOT

basis• Special Purpose Vehicle (SPV) for Port Connectivity

Projects• NHAI is also proposing to award projects under a long

term Operations, Maintenance and Transfer (OMT) concession.

• Most of the projects have been developed or are under development on

o Public Private Partnership (PPP) basis through Build Operate and Transfer (BOT)-Annuity and Build Operate and Transfer (BOT)-Toll mode.

o Typically, in an annuity project, the project IRR is expected to be 12-14% and equity IRR would be 14 -16%.

o For toll projects, where the concessionaire assumes the traffic risk, the project IRR is expected to be around 14-16% and equity IRR around 18-20%.

BOT (Toll)• Private developers/ operators, who invest in

tollable highway projects, are entitled to collect and retain toll revenues for the tenure of the project concession period.

• The tolls are prescribed by NHAI on a per vehicle per km basis for different types of vehicles.

• A Model Concession Agreement (MCA) has been developed to facilitate speedy award of contracts.

• This framework has been successfully used for award of BOT concessions. The MCA has been revised recently and current projects are being awarded under the revised MCA

BOT (Annuity)

• The concessionaire bids for annuity payments from NHAI that would cover his cost (construction, operations and maintenance) and an expected return on the investment.

• The bidder quoting the lowest annuity is awarded the project.

• The annuities are paid semi-annually by NHAI to the concessionaire and linked to performance covenants.

• The concessionaire does not bear the traffic/ tolling risk in these contracts.

Operate, Maintain and Transfer Concession

• NHAI has recently taken up award of select highway projects to private sector players under an OMT Concession.

• Till recently, the tasks of toll collection and highway maintenance were entrusted with tolling agents/ operators and subcontractors, respectively. These tasks have been integrated under the OMT concession.

• Under the concession private operators would be eligible to collect tolls on these stretches for maintaining highways and providing essential services (such as emergency/ safety services).

Special Purpose Vehicle for Port Connectivity Projects

• NHAI has also taken up development of port connectivity projects by setting up Special Purpose Vehicles (SPVs) wherein NHAI contributes upto 30% of the project cost as equity.

• The SPVs also have equity participation by port trusts, State Governments or their representative entities.

• The SPVs also raise loans for financing the projects• SPVs are authorised to collect user fee on the developed

stretches to cover repayment of debts and for meeting the costs of operations and maintenance.

Bidding ProjectsProjects are awarded as per the model documents-• Request for Qualification (RFQ), Request for

Proposal (RFP) and Concession Agreement - provided by the Ministry of Finance. NHAI amends the model documents based on project specific requirements.

• Stage 1: Pre-qualification on the basis of Technical and Financial expertise of the firm and criteria set out in the RFQ Document.

• Stage 2: Commercial bids from pre-qualified bidders are invited through issue of RFP.

Process and Its Validity• PROCESS1. Completion of the preparatory works as outlines in

guidelines for the identified projects.2. Finalisation of Bidding Documents.3. Invitation of Bids.4. Pre-bid Conference.5. Evaluation of bids.6. Awards of concession.7. Signing of the Agreement. • BID VALIDITY The bids shall remain valid for a period up to and including

the date 180 (one hundred and eighty) days from the last date of submission of bids.

TH

ANKYOU