A Paradigm Shift
Building Hi-Tech Highways & Rural Roads, reports Jeet Singh.
All the developed countries of the world, irrespective of their geographical and ideological barriers, have made a mark in the field of economic development and social upliftment only after putting in place a top class infrastructure. Similarly, India needs to create an efficient and dependable road network to improve public access to services like education, health and simultaneously strive to sharpen the industrial and agro products market delivery system. One of the main reasons for sluggish growth in Indian agriculture sector is the poor road network in rural areas, which makes farmers access to market and mandis difficult.
Today, there is a broad consensus that achieving a growth rate of about nine percent per annum is necessary to eliminate poverty and improve the quality of life of rural masses. One of the preconditions for achieving the targeted growth is the creation of top–class road network. But the central and states agencies did not have enough funds. It is, therefore, necessary to explore the possibility of building infrastructure through forging Public Private Partership (PPP). The road sector in many ways exemplifies both challenges and opportunities in infrastructure development.
National Highways constitute two percent length of the country’s total road network, but carry 40 percent traffic. The state highways and major district roads are catering to the needs of about 25 percent traffic. Even today the National Highways in their present form are not sufficient to cater to the traffic intensity requirements. Of the total national highways network 13.2 per– cent of them are four-lane (two lane dual carriageway), 58 percent are two-lane (7m) and the rest are either single or intermediate lane, said a senior NHAI official. He said adding, “In view of this, the National Highways Authority of India (NHAI) has taken over about 20,000 km length of the highways and the process of its strengthening and upgrading is being carried out under the National Highway Development Programme Phase I to VII, which is expected to be completed by 2012. The major chunk of investment is being sourced through PPP in the form of build-operate-and-transfer system (BoT). The remaing portion of the National Highways and road network whether state highways, major district roads or an ordinary road has been entrusted to the state PWDs and other local bodies.”
The much hyped Golden Quadrilateral project linking four metros of the country including Delhi, Mumbai, Chennai and Kolkata, is being completed under the National Highways Development Programme Phase I and II. The 84 percent portion of the project, which includes four laning of Delhi-Mumbai-Chennai-Kolkata, North South Corridor from Srinagar to Kanyakumari and East-West Corridor from Silchar to Porbandar, has been awarded on Engineering Procurement Contracts (EPCs) model and the rest is on PPP, BoT, Annuity, and SPV basis. The Committe on Infrastructure, headed by the Prime Minister has also approved development programme for the National Highways under NHDP Phase III to VII for seven years involving an investment of Rs 2,20,000 crore.
The stretches assigned include, the 226 km Gurgaon-Jaipur stretch on NH-8 to Emirates Trading Agency (ETA) alongwith KMC Constructions, the 43 km Chennai-Tada section of NH-5 to Larsen & Toubro (L&T), the 240 Surat-Dahisar section of NH-8 to IRB Infrastructure Developers and Deutsche Bank, the 82 km Chilakaluripet-Vijayawada stretch on NH-5 to UM Malaysia and Infrastructure Development Finance Company (IDFC) and the 291 km Panipat–Jalandhar section on NH-1 to a consortium of Spains Isolex Corsan and Soma Enterprise Limited.
While awarding these projects, the NHAI has experimented with a revenue-sharing model, introduced in the new draft of the model concession agreement (MCA) and has eliminated the negative grant format. Under the revenue-sharing model, existing toll stretches on highways will be handed over to private bidders who will start sharing revenue with the government from the date of the financial year closure.
The NHDP Phase V, which envisages six-laning of 6,500 km of high-traffic-density corridors, has a deadline of December 2012. The six-laning is being constructed on the already four-laned 5,700 km stretches where the traffic volume is projected to increase in the near future. The entire phase is being implemented on the design-build-finance-operate model at an estimated investment of Rs. 412.1 billion.
Another clause in the MCA states that the traffic risk, which is currently being borne by the concessionaire, will reduce significantly under the new mechanism. As per the MCA, the concession period can be extended or reduced in case traffic growth falls short or exceeds the expected traffic level respectively. The concession period can be increased by 1.5 percent for every 1 percent shortfall in actual traffic compared to the targeted traffic volume. However, this clause is subject to a cap of 20 percent of the concession period, he pointed out.
Earlier, the negative grant concept, which involves an upfront payment to the government by the concessionaire, had received a major boost under this phase. In July 2006, the NHAI had awarded two projects in Gujarat, wherein the Bharuch-Vadodara stretch was assigned to Ideal Road Builders for a negative grant of Rs 5.04 billion. The project involves six-laning of the high-traffic density of 65 km four-lane corridor. The total project cost including the negative grant component is Rs 14.09 billion and the cost has been funded through a loan of Rs 12.11 billion and equity of Rs 1.98 billion. Further the company has spent Rs 7.65 billion including negative grant, as of November 30, 2007. The project, which began in 2007, is expected to be completed by June 2009, has so far progressed on schedule, confided an NHAI source.
Similarly, the Bharuch-Surat projects, which was also awarded at a total negative grant of Rs 9.75 billion covers a length of 83.3 km and was awarded to L&T at a cost of Rs 7.5 billion. Larson & Toubro, paid a negative grant of Rs 4.71 billion to secure the project. However, L&T stated in August last year that it was facing losses to the tune of Rs 4 million per day on the project on account of delay in environmental clearance. The company was awarded the project in July 2006 and had expected to begin work by December 2006 since 90 percent of the land had been acquired by the state government. However, later L&T realised that the tree plantation along the stretch was under the purview of the forest department. The company had already allocated 106 engineers, equipment worth Rs 500 million and funds for the project. The NHAI, which is responsible for the required clearance, as per the contract, is paying about Rs 2.5 million a month to L&T for the delay. From time to time, these developments have been covered in NBM&CW.
“The industrial township of Manesar and the proposed industrial hub in Sonipat district will crisscross the expressway. We are monitoring the progress of the project on a fortnightly basis to ensure that it gets completed within the stipulated deadline” MD, HISDC, claimed.
Likewise, Gurgaon-Jaipur expressway, another mega project in the periphery of Delhi which will make Delhi-Jaipur stretch signal free, is all set to start. The NHAI sources said that land for the project has already been acquired. The 225.60 km expressway with an investment of Rs 1896.25 crore is expected to be completed by June 2011. The project which is a part of NHDP Phase V has been awarded on BoT Toll basis on the design-built-operate-finance model will have three toll plazas beyond Gurgaon. The concessionair period of the project is 12 years, which includes two-and-a-half years construction period.
In addition, the Uttar Pradesh government has recently given a go ahead to five more expressways to boost infrastructure in the state. “The blueprint for the 250 km eight-lane Ghaziabad-Dehradun-Haridwar expressway, which will be the first inter-state venture with Uttarakhand, is ready and the government has already received the preliminary environment clearance for the project. The government is all set to invite expressions of interest from consultants to prepare a detailed feasibility report on the project,” senior state government official said.
Other expressways include: the 950-km Jhansi-Kanpur-Lucknow-Gorakhpur-Kushinagar, 500-km Agra-Kanpur expressway, 350-km Bijnore-Moradabad-Fatehgarh and the Lucknow-Barabanki-Nanpara expressway. The five expressways crisscrossing the state are stretching up to 2,500 km and will be in addition to the Taj and Ganga expressways where work has already begun. The government has planned to construct the projects on a build-operate and transfer model and is taking PPP route for project funding.
In addition, there is a strong policy commitment of the Planning Commission for privatization and structural reforms. The central government is providing viability gap funding to enhance the commercial viability of highways projects promising high economic returns. Currently, many state governments are shifting to public private partnership. Today, Rajasthan is having 32 road projects at an estimated cost of Rs 1,912 crore, Madhya Pradesh 23 projects valued at Rs 1,150 crore and also two urban infrastructure projects of Rs 2,078 crore. Karnataka has also given go ahead signal to 7 road projects of Rs 702 crore, besides 10 urban infrastructure projects involving an investment of Rs 347crore, he claimed.
Not just this, the central government has recently declared 1,850 km long Trans-Arunachal Highway as the NH–52B and its up gradation work will be carried out under SARDP for the North East. While the 100 km stretch of the highway will pass through Assam and the rest will run across Arunachal Pradesh. Similarly, the government has also decided to upgrade NH-52, which is currently a single laned, and connecting roads will be constructed from the highway to all district headquarters of the state. Apart from this, a Rs 1000 crore missing link between NH-57 and NH-37 is also be declared as an extension of the NH-37. The entire project will have two laned connectivity right through Arunachal and stretch out near Dibrugarh and will touch Bomdila, Nechipur, Seppa areas of the state. The bidding process is likely to start in the next couple of months and the highway would be completed by 2009 end.
In addition, under the ongoing urban infrastructure development scheme, the government has secured $200 to 300 million funds from the Asian Development Bank (ADB) for upgrading infrastructure in the eight north–eastern states. The government has initiated the consultation process with concerned states and asked for appraisal reports of the selected cities for infrastructure upgradation. The project under the scheme will be spread over seven to eight years.
Today, there is a broad consensus that achieving a growth rate of about nine percent per annum is necessary to eliminate poverty and improve the quality of life of rural masses. One of the preconditions for achieving the targeted growth is the creation of top–class road network. But the central and states agencies did not have enough funds. It is, therefore, necessary to explore the possibility of building infrastructure through forging Public Private Partership (PPP). The road sector in many ways exemplifies both challenges and opportunities in infrastructure development.
Current Highways Scenario
Currently, our road network across the country carries 85 percent of the total passengers and 61 per–cent of freight traffic.
Projects in Full Swing
In the beginning of the current year, the NHAI awarded five projects stretching upto 900 km at a collective value of Rs 60 billion. The Authority has, as promised, awarded projects with an average length of 150 km each.
While awarding these projects, the NHAI has experimented with a revenue-sharing model, introduced in the new draft of the model concession agreement (MCA) and has eliminated the negative grant format. Under the revenue-sharing model, existing toll stretches on highways will be handed over to private bidders who will start sharing revenue with the government from the date of the financial year closure.
The NHDP Phase V, which envisages six-laning of 6,500 km of high-traffic-density corridors, has a deadline of December 2012. The six-laning is being constructed on the already four-laned 5,700 km stretches where the traffic volume is projected to increase in the near future. The entire phase is being implemented on the design-build-finance-operate model at an estimated investment of Rs. 412.1 billion.
Revenue Sharing Model
“The revenue sharing model allows a better risk-sharing mechanism between the government and the concessionaire. Further, the MCA states that the revenue share quoted for the initial year could be increased for each subsequent year by an additional 1 percent as the cost of servicing loans for the concessionaire decreases” says Head, PPP,CRISIL, Risk & Infrastructure Solutions, Bhanu Mehrotra.Another clause in the MCA states that the traffic risk, which is currently being borne by the concessionaire, will reduce significantly under the new mechanism. As per the MCA, the concession period can be extended or reduced in case traffic growth falls short or exceeds the expected traffic level respectively. The concession period can be increased by 1.5 percent for every 1 percent shortfall in actual traffic compared to the targeted traffic volume. However, this clause is subject to a cap of 20 percent of the concession period, he pointed out.
Earlier, the negative grant concept, which involves an upfront payment to the government by the concessionaire, had received a major boost under this phase. In July 2006, the NHAI had awarded two projects in Gujarat, wherein the Bharuch-Vadodara stretch was assigned to Ideal Road Builders for a negative grant of Rs 5.04 billion. The project involves six-laning of the high-traffic density of 65 km four-lane corridor. The total project cost including the negative grant component is Rs 14.09 billion and the cost has been funded through a loan of Rs 12.11 billion and equity of Rs 1.98 billion. Further the company has spent Rs 7.65 billion including negative grant, as of November 30, 2007. The project, which began in 2007, is expected to be completed by June 2009, has so far progressed on schedule, confided an NHAI source.
Similarly, the Bharuch-Surat projects, which was also awarded at a total negative grant of Rs 9.75 billion covers a length of 83.3 km and was awarded to L&T at a cost of Rs 7.5 billion. Larson & Toubro, paid a negative grant of Rs 4.71 billion to secure the project. However, L&T stated in August last year that it was facing losses to the tune of Rs 4 million per day on the project on account of delay in environmental clearance. The company was awarded the project in July 2006 and had expected to begin work by December 2006 since 90 percent of the land had been acquired by the state government. However, later L&T realised that the tree plantation along the stretch was under the purview of the forest department. The company had already allocated 106 engineers, equipment worth Rs 500 million and funds for the project. The NHAI, which is responsible for the required clearance, as per the contract, is paying about Rs 2.5 million a month to L&T for the delay. From time to time, these developments have been covered in NBM&CW.
Projects Crisscrossing NCR
“The 135 km, Western Peripheral Expressway (Kundli-Manesar-Palwal) on the outskirts of Delhi, which is a Rs 2,200 crore project, would be completed by July 2009, a month ahead of its scheduled time,” says KMP Expressway, Chairman, H S Kohli.“The industrial township of Manesar and the proposed industrial hub in Sonipat district will crisscross the expressway. We are monitoring the progress of the project on a fortnightly basis to ensure that it gets completed within the stipulated deadline” MD, HISDC, claimed.
Likewise, Gurgaon-Jaipur expressway, another mega project in the periphery of Delhi which will make Delhi-Jaipur stretch signal free, is all set to start. The NHAI sources said that land for the project has already been acquired. The 225.60 km expressway with an investment of Rs 1896.25 crore is expected to be completed by June 2011. The project which is a part of NHDP Phase V has been awarded on BoT Toll basis on the design-built-operate-finance model will have three toll plazas beyond Gurgaon. The concessionair period of the project is 12 years, which includes two-and-a-half years construction period.
In addition, the Uttar Pradesh government has recently given a go ahead to five more expressways to boost infrastructure in the state. “The blueprint for the 250 km eight-lane Ghaziabad-Dehradun-Haridwar expressway, which will be the first inter-state venture with Uttarakhand, is ready and the government has already received the preliminary environment clearance for the project. The government is all set to invite expressions of interest from consultants to prepare a detailed feasibility report on the project,” senior state government official said.
Other expressways include: the 950-km Jhansi-Kanpur-Lucknow-Gorakhpur-Kushinagar, 500-km Agra-Kanpur expressway, 350-km Bijnore-Moradabad-Fatehgarh and the Lucknow-Barabanki-Nanpara expressway. The five expressways crisscrossing the state are stretching up to 2,500 km and will be in addition to the Taj and Ganga expressways where work has already begun. The government has planned to construct the projects on a build-operate and transfer model and is taking PPP route for project funding.
Projects on the Anvil
According to NHAI sources, the Authority has 43 more projects covering around 5,500 km with an estimated investment of about Rs 350 billion in the pipeline. Of these Karnataka has 6 projects on NHs-4 and 7 with a length of about 652 km involving an investment of Rs 41.336 billion, Andhra Pradesh with 6 projects on NH-5 stretching a length of 939 km and an investment of Rs 64.93, Uttar Pradesh, 8 projects on NHs-2, 3 and 24 with 1,030 km and involve a cost of Rs 65.29 billion, Orissa 4 projects on NH- 5 with a length of 472 km and valued at Rs 29.93 billion. Similarly, Gujarat and West Bengal have 3 projects each on NHs 8 and NE-1 stretching up to 291 km and 395 km with a projected cost of Rs 18.45 and 25.05 respectively. While Bihar, Jharkhand, Maharashtra, Rajathan, and Gujarat have 2 projects each while Haryana and Punjab have one each on NHs 1 and 95 and 21 with an investment of Rs 8.88 and 5.20 billion respectively.Govt Initiatives
The Union Rural Development Minister, Dr. Raghuvansh Prasad Singh, said that the central government is committed to develop top class road network in the countyside so that fruits of development reach all strata of society. The government has launched a time-bound plan under Bharat Nirman for building rural infrastructure in partnership with State Governments and Panchayati Raj Institutions. The Pradhan Mantri Gram Sadak Yojana (PMGSY), is aimed at providing connectivity to habitations with more than 500 population (250 and above for hilly, desert and tribal areas). Out of the total outlay of Rs 1,74,000 crore for Bharat Nirman, 28 percent has been earmarked for constructing rural roads. Under the PMGSY scheme the government has planed to construct nearly 3,70,000 km new roads and has targeted the strengthening and upgradation of 3,71,000 km existing roads. The schemes involve a total expenditure of Rs 1, 32,000 crore for the next 10 years.In addition, there is a strong policy commitment of the Planning Commission for privatization and structural reforms. The central government is providing viability gap funding to enhance the commercial viability of highways projects promising high economic returns. Currently, many state governments are shifting to public private partnership. Today, Rajasthan is having 32 road projects at an estimated cost of Rs 1,912 crore, Madhya Pradesh 23 projects valued at Rs 1,150 crore and also two urban infrastructure projects of Rs 2,078 crore. Karnataka has also given go ahead signal to 7 road projects of Rs 702 crore, besides 10 urban infrastructure projects involving an investment of Rs 347crore, he claimed.
Not just this, the central government has recently declared 1,850 km long Trans-Arunachal Highway as the NH–52B and its up gradation work will be carried out under SARDP for the North East. While the 100 km stretch of the highway will pass through Assam and the rest will run across Arunachal Pradesh. Similarly, the government has also decided to upgrade NH-52, which is currently a single laned, and connecting roads will be constructed from the highway to all district headquarters of the state. Apart from this, a Rs 1000 crore missing link between NH-57 and NH-37 is also be declared as an extension of the NH-37. The entire project will have two laned connectivity right through Arunachal and stretch out near Dibrugarh and will touch Bomdila, Nechipur, Seppa areas of the state. The bidding process is likely to start in the next couple of months and the highway would be completed by 2009 end.
In addition, under the ongoing urban infrastructure development scheme, the government has secured $200 to 300 million funds from the Asian Development Bank (ADB) for upgrading infrastructure in the eight north–eastern states. The government has initiated the consultation process with concerned states and asked for appraisal reports of the selected cities for infrastructure upgradation. The project under the scheme will be spread over seven to eight years.
NBM&CW September 2008
