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Indian Roads Sector


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Infrastructure Advisor2

Frequently used abbreviationsAbbr. Description

MoRTH Ministry of Road Transport & Highways, Govt. of India

NH National Highways. Developed by the National Highways Authority of India

NHAI National Highways Authority of India

NHDP National Highways Development Program

GQ Golden Quadrilateral. A scheme under National Highways Development Program Phase I

NSEW North-South East-West corridors. A scheme under National Highways Development Program Phase II

SH State Highways. Developed by the responsible department/development corporation of the State Governments

VGF Viability Gap Funding. A grant, one-time or deferred, provided by the Central Govt. with the objective of making a project

commercially viablePPP Public Private Partnership. A project based on a contract or concession agreement, between a Govt or statutory entity and a

private sector company, for delivering an infrastructure service on payment of user charges

PPP-AC Public Private Partnership Appraisal Committee. A Committee set up by the Planning Commission of India for appraisal &approval of infrastructure projects under the PPP mode

PSP Private Sector Participation

BOT Build-Operate-Transfer. A form of PPP model most commonly used in the roads sector. BOT projects can be either annuity or toll(user charges) based

DBFO Design-Build-Finance-Operate. A form of PPP model likely to be used in the road sector in future.

EPC Engineering-Procurement-Construction. Construction contracts on lumpsum turnkey basis.

MCA Model Concession Agreement. A template for concession agreement with standardized clauses, to be used in Public PrivatePartnership projects, provided by the Planning Commission of India

WPI Wholesale Price Index. An economic indicator used to measure the movement of prices of commodities in all trade & transactionsMost widely used price index in India.


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Key messages

Institutional framework in place in the National highways segment, owing to the creation of NationalHighways Authority of India, & a dedicated PPP appraisal committee at the Centre

Alarge & assured pipeline of National highways in the upcoming phases of National HighwaysDevelopment Program, primarily on PPP basis

Potential for BOT exists in State highways as well, and given the Viability Gap Funding scheme of theCentre, states will see more action going forward

India has a vast but low quality road network. Need for investments in the sector is recognized


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Indiahas a vast road network by internationalstandards

Type Length (km) % of total

National highways & Expressways 66,790 2%

State highways 1,31,899 4%

Major district roads 4,67,763 14%

Rural & other roads 26,50,000 80%

Total 33,16,452 100%

Indias road network of

~3.32 million km, is second

only to that of the UnitedStates

Source: Ministry of Road Transport & Highways

The Indian road networkWorlds top 10 countries

(Total road network)

Million km

USA 6.37

India 3.32

Brazil 1.98

China 1.40

Japan 1.15

Russia 0.95

Australia 0.91

Canada 0.90

France 0.89

Italy 0.67

M


5/20Infrastructure Advisor5

Majorissue is not the size, but the low quality of theroad network

Status of National Highways

Single-

lane

35%

Double-

lane

55%

Four ormore

lanes

10%

Source: NHAI, Planning Commission

Status of State Highways

Single-

lane

75%

Two or

more

lanes

25%

Modal shift

Composition of road traffic is currently estimated to be 65%of total freight & 80% of total passenger traffic (as against12% of total freight & 31.6% of total passenger traffic in the1950s)

Traffic on the roads is growing at the rate of 7-10% perannum

Growth of vehicles has been ~12% per annum for the last

few years

Issues

Most of the road network being single or double lane,provides low capacity and slow vehicle speeds

National highways are 2% of the network, but carry 40% ofthe total traffic

Road maintenance throughout the network is low, leadingto poor quality of roads

About 40% of the villages are not connected by all-weatherroads



investments in the sector to fuel economicgrowth

The Govt. of Indias Vision 2021 identified transport infrastructure as a major constraint to the growth of the

economy, and assessed the capital funding need to be around $ 56 bn on highway improvements in the period2001 2011. The investment figure has grown much more since these initial plans

Source: World Bank

SchemePeriod 2001 - 2011 Period 2011 - 2021

Length (km) Amount ($ bn) Length (km) Amount ($ bn)

A. Expressways 3,000 7.5 7,000 17.5

B. National highways

4-laning/6-laning 16,000 16.0 19,000 19.0

2-laning with hard shoulders 15,000 4.7 7,000 2.2

Strengthening weakening pavements 20,000 3.8 24,000 4.5

Bypasses, bridges, safety measures, etc Lump sum 1.8 Lump sum 2.3

Expansion of NH system 10,000 3.8 12,000 4.5

C. State highways 0.0

4-laning/6-laning 3,000 2.5 6.3

2-laning with hard shoulders 35,000 7.0 12.5

Strengthening weakening pavements 30,000 5.5 7.5

Bypasses, bridges, safety measures, etc Lump sum 2.5 2.5

Expansion of SH system 10,000 1.3 2.5

Total 56.25 81.25



Key messages




India has a vast but low quality road network. Need for investments in the sector recognized

N



NHAIs establishment provides strong institutionalsupport for the national highways segment

*The National Highways Authority of India Act, 1988

The National Highways Authority of India (NHAI) was constituted in 1988 by an act of Parliament* andoperationalized in 1995. It is responsible for the development, maintenance, and management of the

National highways in the country

Time and cost bound implementation of national highway projects

Providing road connectivity to major ports

Involving the private sector in financing the construction, maintenance,and operation of national highways and wayside amenities

Improvement, maintenance & augmentation of the existing nationalhighway network

Implementation of road safety measures and environment management

Elements of themandate for NHAI

N


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NHAIis entrusted with implementing the biggest integratedeffort to upgrade Indias national highway network

Status as on 31 Mar 200Source: NHA

NHDPPhase

ProjectOverall

project (km)

Completed Underimplementation Balance for award

Length(km)

No. ofcontracts

Length(km)

No. ofcontracts

Length(km)

No. ofcontract

I

Golden Quadrilateral 5,846* 4,250 94 1,465 31

Port connectivity 380 111 6 248 7 21

Others 320 287 9 32 3

II

North South EastWest Corridor

6,159** 5,267 136 861 2

Others 482 462 9 20

III III A & B 11,542 30 1 1,767 27 9,746 10

IV Not started 20,000 20,000

Not

AvailablV Launched in Jul 2006 6,500 148 2 6,352VI Not started 1,000 1,000

VII Not startedYet to befinalized

Not Available

*2 stretches of 131 km terminated**1 stretch of 31 km terminated

The National Highways Development Program (NHDP) was launched in 1999, initially with the objective of

four-laning 13,000 km of highways; but the scope of the program has increased almost 4 times

Th G ld Q d il t l (GQ) P j t i d t d l i


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The Golden Quadrilateral (GQ) Project aimed at developing4-lanehighways connecting the 4 important Indian metros

Delhi

Mumbai

Chennai

Kolkata

*Representative map; not to scale

Corridor NH No Length

(km)

Delhi-Mumbai 8, 76, 79 1,419

Mumbai-Chennai 4, 46, 7 1,290

Kolkata-Chennai 5, 6, 60 1,684

Delhi-Kolkata 2 1,453

Total 5,486

The GQ project is 75% complete, and rest of the stretches havealready been awarded

Most contracts under implementation lie on the Delhi-Kolkata armMost of the stretches were developed by NHAI through the award ofEPC contracts

Almost 35% of the project length was developed by externalassistance (funding by World Bank, ADB and JBIC)

Source: NHAI, Projects today, Feedback analysis

Ph II i d t d l i 4 l hi h ti


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Phase II aimed at developing 4-lane highways connectingthe extremities of the country

*Representative map; not to scale

Highway connectivity is beingestablished between:

Porbandar, Gujarat in the West toSilchar, Assam in the East

Srinagar, Jammu in the North toKanyakumari, Tamil Nadu in the

SouthThe NSEW project is actively underimplementation

85% of the project length hasbeen awarded

BOT (Annuity) & BOT (toll) have beenadopted for recent contracts

Srinagar

Delhi

Kanyakumari

Porbandar

Silchar

Source: NHAI, Projects today, Feedback analysis

Though Phase I & II are complete/awarded NHDP


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Though Phase I & II are complete/awarded, NHDPoffers a large opportunity in the segment

NHDPPhase

DescriptionLength(km)

Cost

($ bn)

Expectedcompletion

Status

III

Rehabilitation & upgradation of existing national

highways into 4-lane, dual carriageway configurationsTargets important stretches not covered in earlier twophases carrying high volumes of traffic, connectingstate capitals with the network developed in earlier 2phases, and providing connectivity to places ofeconomic, commercial & tourism importance

10,000 16.3 2012Sub-phases IIIA & B havebeen launched

IVDevelopment of single-lane highways to 2-lane withpaved shoulders, and strengthening of existing 2-lane

highways

20,000 7.0 2015Yet to begin,in planning

stage

VWidening of high traffic density 4-lane stretchesdeveloped under Phase I, to 6-lane

6,500 10.3 2010Launched inJul 2006

VI

Development of expressways connecting majorcommercial and industrial townships

The 400 km Mumbai-Vadodara expressway has beenidentified as one of the potential stretches under this

segment

1,000 4.2 2015 Yet to begin

VIINationwide construction of bypasses, ring roads &flyovers on major national highways

Notknown

4.2 2014 Yet to begin


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Key messages


A large & assured pipeline of National highways in the upcoming phases of National Highways

Development Program, primarily on PPP basis



Private sector participation is necessary to bridge


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Private sector participation is necessaryto bridgethe funding gap

Financing mechanism Description

Fuel cess Govt. of India introduced a cess on both petrol & diesel,which currently contributes $ 1.25 to 1.5 bn annually. The

funds collected are put aside in a ring-fenced CentralRoad Fund (CRF) for exclusive utilization in developmentof roads

External assistance Grants from International agencies such as World Bankand ADB

Loans Loans from international lending agencies such as theJapanese Bank of International Co-operation

Market borrowings NHAI taps the market by securities cess receipts

Source: NHAI, Go

The Committee on Infrastructurehas estimated that out of the $

55 bn required for NHDP, $ 44.75bn or 82% of funds are expectedto come from the private sector

NHAI Expenditure vs financing over the years (Rs. crores)

871

4189

9800

8059

1524

3038

9096

1404

6785

3442 34483904

2000 2001 2002 2003 2004 2005

Expenditure Financing

Funding pattern across phases shows very high


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Funding pattern across phases shows very highexpectations from the private sector by the Govt

Phase I: Golden Quadrilateral

NHAI

37%

External

assistance

35%

Others

7%MORTH

7%

BOT

6%BOT-SPV

2%

BOT-

Annuity

6%

Phase II: NSEW

BOT

18%

NHAI

35%

BOT-

Annuity

14%

External

assistance

33%

Phase IIIA, IIIB & V

BOT

100%

*Charts show break-up of funding for total length ofprojects completed and/or under implementation

The supremacy of the BOT model over the traditional EPC contracts has been established in theNational highways segment. The Committee on Infrastructure, Govt. of India has taken a stand that for NHDP Phase-III onwards, all contracts for provision of road services would be awarded only on

BOT basis either based on Toll or Annuity or a suitable Toll / Annuity hybrid), with EPC awards beingmade in specified exceptional cases only

Source: NHAI, Planning Commission, Feedback analysis

(Expectation by the Govt.)

K


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Key messages



Potential for BOT exists in State highways as well, and given the Viability Gap Funding scheme of the

Centre, states will see more action going forward


Potential for BOT projects exists in states, and


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Potential for BOT projects exists in states, andincreased participationby private sector foreseen

In a World Bank study of traffic across 6 states - constituting 30% of total state highwaynetwork 13,000 km could potentially be taken up for BOT

Traffic on these stretches was > 5,000 PCUS, considered as the minimum forviability

36% of total network (37,000 km) in these states

Traffic in PCUs on State Highways

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Andhra

Pradesh

Karnataka Madhya

Pradesh

Maharashtra Uttar

Pradesh

West Bengal

k

mo

fStateHighways

>5,000 PCUs

5,000

PCUsAndhra Pradesh 304 1,741

Karnataka 4,089 3,890

Madhya Pradesh 2,205 60

Maharashtra 11,074 6,047

Uttar Pradesh 4,439 1,159West Bengal 1,416 589

Total 23,527 13,486

Source: World Bank

Large investments required in the state highways


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Large investments required in the state highwayssegment indicating healthy pipeline of projects

Period 2001 - 2011 Period 2011 - 2021Length (km) Amount ($ bn) Length (km) Amount ($ bn)

Four laning / Six laning 3,000 2.5 7,000 6.2

Two-laning with hard shoulders 35,000 7 60,000 12.

Strengthening weak pavements 30,000 5.5 40,000 7.

Bypasses, bridges, over bridges,safety and drainage measures Lump sum 2.5 Lump sum 2.

Expansion of SH system 10,000 1.25 20,000 2.

Total 18.75 31.25

Vision 2021 Capital Investment on State Highway Network (at 1999 prices)

Source: World Bank

PPP in state highways limited in the past but Centres


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PPP in state highways limited in the past, but Centre sVGF scheme will provide impetus

A few states (Andhra Pradesh, Gujarat, Maharashtra, Madhya Pradesh, Rajasthan, Tamil Nadu andPunjab) have made some progress in attracting PSP in state highways

Creating Road Development Corporations (RDCs)

Amendment of the Indian Toll Act (1851) to allow the private sector to levy tolls on stateroads and bridges

The overall role of the private sector has been limited in this segment

Rehabilitate, operate and maintain concessions, bypasses, and bridges have usually been the most

viable projects for PSP (captive traffic for tolls)

The new Scheme for financial support to PPPs in infrastructure being implemented at the Central

level by the Ministry of Finance, will provide impetus to the State highways segment, across statesUnder this scheme, the Govt. will provide viability gap funding to infrastructure projects(including roads), not exceeding 20% of the total project cost

The Govt or statutory entity that owns the project, may provide additional grant out of itsbudget, not exceeding a further 20% of the total project cost

The funding under this scheme will normally be in the form of a capital grant at the stage ofproject construction

State highways are likely to see increased action in PPP projects, owing to the new Viability Gap

Funding scheme being implemented by the Centre. The empowered committee under the Departmentof economic affairs, Ministry of Finance, has started receiving proposals for approval from various

State Govts under this scheme

Source: Department of economic affairs, Ministry of Finance; , GoI published data on PPP projects, World Bank


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Indias Leading Integrated

Infrastructure Development Company

www.feedbackventures.com

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