U.S.-India Business Council

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U.S.-India Business Council welcomes The
Honble Brahm Dutt Secretary, Department of Road
Transport Highways Ministry of Shipping, Road
Transport and Highways Government of
India September 24, 2008
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DEVELOPMENT OF NATIONAL HIGHWAYS IN INDIA

• By
• Mr. Brahm Dutt, Secretary
• Department of Road Transport Highways
• Ministry of Shipping, Road Transport Highways
• Govt. of India

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INDIAN ROAD NETWORK
Total Length 3.3 Million km

• Roads carry 85 of passenger 70 of freight
  traffic
• National Highways constitute only 2 of length,
  but carry 40 of the traffic on Indian Roads.

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NATIONAL HIGHWAYS STATUS
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NATIONAL HIGHWAYS DEVELOPMENT PROJECT (NHDP)
SEVEN PHASES
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Other Projects

• SARDP-NE Special Accelerated Road
  development programme in North-
  Eastern region of India
• ICTT-Cochin International Container
  Transhipment Terminal- Cochin

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Financing Plan of NHDP (2005-2015) (2007 prices)
Note CCConstruction Contract, EPCEngineering
procurement Construction 1 US Rs.
40.00 To be determined based on budgetary
resources and the tolling policy for two-lane
highways
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Break up of Funding by Private Sector and
Government Sector
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ASSURED FUNDING CENTRAL ROAD FUND

• The Government of India, under the Central Road
  Fund Act, 2000 created a non-lapsable dedicated
  fund for NHDP by levying cess on High-Speed
  Diesel and Petrol at the rate of Rs. 2.00 per
  liter out of which allocation for Rs. 1.50 per
  liter as under
• 50 of the Cess collected from Diesel is for
  rural roads.
• Balance 50 Cess from Diesel and the entire Cess
  on Petrol, the allocation of funds for different
  categories of roads are as under
• 57.5 for National Highways
• 12.5 for Road Over Bridges / Rail Over Bridges
  (to be constructed by Railways)
• 30 for Roads other than National Highways
• The balance Cess at the rate of Rs. 0.50 per
  liter (levied in 2005-06) is allocated
  exclusively for National Highways making the
  total Cess at the rate of Rs. 2.00 per liter.
• From CRF, the NHDP has been allocated Rs. 6400
  crores in the year 2006-07.

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PUBLIC PRIVATE PARTNERSHIP (PPP) INCENTIVES

• Viability Gap Funding up to 40 of project cost
  to make project viable
• Duty free import of high capacity and modern
  construction equipments
• 100 tax exemption in any 10 consecutive years
  within a period of twenty years after completion
  of the project
• Agreements to avoid double taxation with a large
  number of countries
• Provision of encumbrance-free land for
  construction of roads
• Well defined and transparent Procurement
  procedure

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PPP INCENTIVES (contd.)

• Foreign Direct Investment up to 100 in road
  sector
• Concession period up to 30 years
• Concessionaire to have the right to collect and
  retain user fee (toll)
• Award of PPP projects based on new Model
  Concession Agreement (MCA)
• Simplified procedure for Land Acquisition 50
  land on or prior to the Appointed Date and
  balance 50 at mutually agreed date

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Policy and Appraisal for PPP Projects

• Committee on infrastructure headed by Prime
  Minister set up to
• Frame policies to ensure time bound development
  of world class infrastructure
• Develop structures to maximize the scope of
  Public Private Partnership
• Monitor progress of key projects
• Standing Finance Committee (SFC) under Secretary,
  Department of Road Transport Highways
  appraises PPP projects of cost greater than 25
  million US but less than 125 million US .
• Public Private Partnership Appraisal Committee
  (PPPAC) under Secretary, Deptt. of Economic
  Affairs and with Secretaries of Planning
  Commission, Deptt. of Expenditure, Deptt. of
  Legal Affairs and Department of Road Transport
  Highways as Members appraises projects costing US
  125 million and above.

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Procurement procedure

• International Competitive Bidding
• Investor friendly Concession Agreement
• Two stage bidding process
• Stage I - Request for Qualification (RFQ)
• based on Technical and Financial
  parameter (each associate /
  member to hold minimum equity of 26 in
  consortium)
• Stage II - Request for Proposal (RFP) to be
  issued to short-listed bidders

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Procurement procedure (contd.)

• Standardization of documents
• Request for Qualification (RFQ) document
  standardized 6,7 and 10 Concessionaires are
  prequalified for 1,2 and 3 projects respectively
  based on their experience score and net worth.
  Prequalification of limited number of
  concessionaires is attracting large
  multi-national companies which are bidding in
  Joint Venture with Indian partners.
• The Request for Proposal (RFP) document for
  inviting the bids from prequalified bidders has
  been standardized.
• Toll Policy Rationalized

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Salient features of new Toll policy

• New Toll Policy proposes to address following
  issues
• Principle governing uniformity of tolling rates
• Fee rates to be Capping rates or Fixed rates.
• Classification of Vehicles
• Fee Rates for different categories of Vehicle.
• Levy and collection of fee on two lane
  Highways.
• Discounts to local traffic/ frequent travelers
• Categories of persons/ Vehicles to be exempted
  from fee.
• Revision of User Fee rates
• Penalties/ fine for evaders/ Overloaded
  vehicles.
• Toll Gates on Access roads to check avoidance
  of toll.
• Distance between two plazas.
• Reasonable period for commencing fee after
  completion.
• Applicability of revisions in toll policy to
  existing BOT/ Ongoing projects.
• User Fee for slow moving vehicles if they use
  main carriageway
• Unauthorized collection of User Charges.

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Main Features of MCA

• Sharing of Traffic Risk
• Target Traffic agreed for a target date
• For 1 shortfall 1.5 increase in Concession
  period (subject to a maximum of 20)
• For 1 excess 0.75 reduction in Concession
  period (subject to a maximum of 10 )
• Revenue Sharing
• Concessionaire to pay a sum of Rupee one per
  annum as concession fee to the Authority
• Concessionaire free to quote an additional
  concession fee in the form of a share in revenue
  from user fee
• This additional concession fee also called as
  premium
• Premium to be paid from Commercial Operation Rate
  (COD) up to end of concession period
• Premium to increase by an additional 1 per year
  as compared to the immediately proceeding year

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Main Features of MCA (contd.)

• Provision for capacity augmentation
• Six months period for Financial Closure after
  award of contract
• 50 required land to be made available on
  appointed date, remaining at mutually agreed date
• Concessionaire to undertake detailed design based
  on Core requirements given by NHAI
• Independent Engineer to review the design
• Performance based Operation Maintenance

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INSTITUTIONAL STRENGTHENING INITIATIVES

• The National Highways Authority of India (NHAI)
  was set up as an autonomous body for the
  development and maintenance of National Highways.
• NHAI is being strengthened to make it
  multidisciplinary body by -
• a) establishing a dedicated setup for Public
  Private Partnership
• b) creating separate cells for
• Project Appraisal
• Monitoring
• Planning
• Quality Assurance
• Standardization and RD
• Contract Management
• Legal and Arbitration and
• Road Safety.

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PPP FOR NHDP PROGRESS SO FAR
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PPP FOR NHDP PROGRESS SO FAR (contd.)
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BOT Toll contracts under revenue sharing system
BOT Toll contracts under Negative Grant
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Foreign Participation in ongoing / completed
projects
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FOREIGN FIRMS APPLIED FOR SHORLISTING FOR RECENT
PPP PROJECTS
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FOREIGN FIRMS APPLIED FOR SHORLISTING FOR RECENT
PPP PROJECTS (Contd.)
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CONDUCIVE INVESTMENT ENVIRONMENT FOR PPP

• Viable projects with road length of 100 km 300
  km involving investment of US 200 million to US
  600 million
• Strong independent legal system
• Equitable dispute resolution mechanism
• Large pool of trained and skilled workforce
• Advanced RD facilities available at reputed
  institutes of international standards

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OPPORTUNITIES

• With such a large number of new projects on
  offer under Public Private Partnership in the
  road sector, there are immense investment
  opportunities for
• Investors
• Companies with diverse business lines wanting to
  diversify to road sector
• Contractors
• Consultants
• Operations and Maintenance Contractors
• Equipment Manufacturers / suppliers
• Toll Operators
• Intelligent Transport System (ITS) companies

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Foreign contractor and Concessionaires involved
in EPC BOT projects
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Foreign Consultants involved in EPC BOT
projects
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INDIAN FIRMS WORKING ON BOT BASED PROJECTS
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INDIAN FIRMS WORKING ON BOT BASED PROJECTS
(Contd.)
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INDIAN FIRMS WORKING ON ANNUITY BASED PROJECTS
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FOREIGN FIRMS WORKING ON BOT BASED PROJECTS
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FOREIGN FIRMS WORKING ON ANNUITY BASED PROJECTS
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THANK YOU
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U.S.-India Business Council welcomes The
Honble Brahm Dutt Secretary, Department of Road
Transport Highways Ministry of Shipping, Road
Transport and Highways Government of
India September 24, 2008