PRESENTATION ON PUBLIC PRIVATE
PARTNERSHIP (PPP) IN NATIONAL HIGHWAYS
DEPARTMENT OF ROAD TRANSPORT & HIGHWAYS
GOVT. OF INDIA
Conference of Chief Secretaries on PPP in Infrastructure
20th May, 2006
EXISTING ROAD NETWORK IN INDIA
Road Category Length Percentage
Expressways 200 -
National Highways (NHs) 65,600 2%
State Highways (SHs) 1,37,700 4%
Major& other District Roads 7,25,425 21%
Rural & other Roads 24,62,100 73%
TOTAL 33,91,025 100%
§ Roads carry 85% of passengers & 61% of freight traffic
§ Less than 2 % length of NHs but carry 40% of traffic
Major Initiatives for Highways
n CRF revamped to create dedicated fund
n National Highways Authority of India
(NHAI) created and made functional
n National Highways Development Project
n Requisite legislative and legal provisions
made for facilitating PPP in road sector
NHDP Phases I,II,III
Phase Approved Cost
NHDP – I Cess and Market borrowings : 18,846 (US$ 4.18 b) 30,300
External Assistance : 7,862 (US$ 1.74 b) [1999 Prices]
BOT/ SPV : 3,592 (US$ 0.79 b) (US$ 6.73 b)
NHDP – II Cess and Market borrowings : 23,420 (US$ 5.20 b) 34,339
External Assistance : 7,609 US$ 1.69 b) [2002 Prices]
BOT/ SPV : 3,310 (US$ 0.73 b) (US$ 7.63 b)
NHDP – III BOT : 22,000 (US$ 4.88 b) 22,000
(US$ 4.88 b)
Total Cess and Market borrowings : 42,266 (US$ 9.39 b) 86,639
External Assistance : 15,471 (US$ 3.43 b) (US$ 19.25 b)
BOT/ SPV : 28,902 (US$ 6.42 b)
Future Phases for NHDP
Mostly through Public Private Partnership
Balance work of GQ and NS-EW corridors (NHDP Phase-I & II) – 8774 km 52,443
Upgradation of 10,000 km of NHs (NHDP Phase-III) on BOT (Toll) 65,197
Upgradation of 20,000 km of NHs to 2-lane with paved shoulders (NHDP 27,800
Phase-IV) on BOT (Annuity)
6-laning of selected stretches [6500 km] (NHDP Phase-V) on BOT (Toll) 41,200
Development of 1,000 km Expressways (NHDP Phase-VI) on BOT (Toll) 16,680
Construction of Ring Roads, Bypasses, Grade Separators, Service Roads 16,680
etc. (NHDP Phase-VII) on BOT
ROAD PROJECT FINANCING
• Dedicated Fund (Cess on Petrol/Diesel)
• Lending from International Institutions
• World Bank
• Public Private Partnership
• BOT (Toll)
• BOT (Annuity)
§ SPV with equity from NHAI
§ Market Borrowings
INCENTIVES FOR PRIVATE SECTOR
• Road Sector has been declared as an Industry.
• 100% tax exemption in any consecutive 10 years out of 20 years.
• Foreign Direct Investment (FDI) up to 100%.
• Provision of Capital Subsidy up to 40% of the project cost to make projects
• Provision of encumbrance free site for work, i.e. Government bears expenses
for land and pre-construction activities.
• Easier external commercial borrowing norms
• Exemption of Capital gains tax for the bonds issued by NHAI.
• Duty free import of high capacity and modern construction equipments.
• NHAI Equity upto 30%.
Potential Advantages to the Government in PPP
• Encourage private investment in the infrastructure sector.
• Reducing public direct spending.
• Public budget could be used in other priority areas and projects, such as
education and social programmes.
• Risks are allocated to the party, which is best suited to handle it.
• Introduce innovation and increased efficiency from the private sector.
• Involvement of experienced and creditworthy sponsors and commercial
lenders, guaranteeing project viability.
• Tapping of advanced technologies and expertise with possible capacity
building of contractors and consultancy firms.
• Development of local capital market.
• Right sizing of public institutions.
• Better road services to users and early delivery.
BOT (Toll) Projects
• Concessionaire’s Responsibilities:
•DBFO (Design, Engineering, Financing, Procurement, Construction,
Operation & Maintenance)
Demand, collect and appropriate the users fees (toll)
Financing, Construction, Partial Traffic Risk, Operation & Maintenance.
BOT (Annuity) Project
n Concessionaire’s Responsibilities :
Design, Engineering, Financing Procurement,
construction and Maintenance
n Concessionaire’s Risk :
Financing, Construction and Maintenance (No Traffic
n Award Criteria:
Minimum Annuity Payment over Fixed Period.
Summary of BOT Toll based Projects
Category Under Implementation Total Grant Completed
No of Length Cost crore) No of Length
Contracts (in km) (Rs. crore) [US$ b] Contracts ( in km)
NHDP Phase I 9 464 3443 718.99 6 287
NHDP Phase 16 812.86 5371.06 -103.38 - -
II [1.19] [-0.02]
NHDP Phase 17 1090 5752 491.91 1 30
III [1.27] [0.10]
Total 42 2356.86 14566.06 1107.61 7 317
Though allowed upto 40% the overall grant was 7.6%
Summary of BOT (Annuity) based
Category Awarded Total Annuity Completed
Projec (Rs. crore)
t [US$ b]
No of Length Cost No. of Length
Contracts (in km) (Rs. Contracts ( in km)
NHDP Phase I 8 476 2354 2888 8 476
NHDP Phase II 4 299 2121 199 - -
Total 12 775 4475 487 8 476
HIGHLIGHTS OF NEW MCA
n Partial guarantee of traffic risk to the Concessionaire.
n Concessionaire’s interest protected in competing roads.
n Performance standards of the highways clearly spelt out.
n Provision for change in scope, if any, required during construction
and operation period included.
n Utilities to be relocated by the Concessionaire but it will be excused
from failure in case of delay by owning agencies.
n Focus on road User’s safety
n Users fee charges, revision thereof and concession to local traffic
clearly spelt out.
n NHAI has to provide land free from all encumbrances. NHAI to bear
cost of all pre-construction activities.
n Risks are allocated to the party, which is best suited to handle it.
HIGHLIGHTS OF NEW MCA (contd.)
n Lowest subsidy/grant quoted by the bidders towards
viability gap funding or earliest premium quoted by the
bidder is the basis for award.
n Force Majeure conditions and relief to the party under
such conditions clearly spelt out.
n Strong dispute resolution mechanisms.
n BOT bids are invited for 6 lane with 20 years concession
period. However, exist option exists for Concessionaire
and the NHAI after 8 years if not interested for 6 laning.
In such case, concession shall be terminated after four
laning with 12 years concession period.
State Support Agreement
n Provide applicable permits to the Concessionaire
n Assist access to infrastructure facilities and
n Erect no barriers to interrupt free flow of traffic
n Assist in regulation of traffic
n Police assistance in the form of Highways Petrol
n Not to undertake any act which violates
n State to pay claims on any breach
n No competing facility within 8 years
n COI headed by PM.
n COS to resolve inter-ministerial issues and problems.
n Restructuring of NHAI to be a multidisciplinary body.
Ø Planning, standardization and quality assurance (PSC)
Ø Project appraisal Group/cell headed by Financial Analyst,
and supported by Transport Economist, Transport
Ø Human Resource (HR) cell
Ø Monitoring cell
Ø Sensitization to PPP
Role of State Govt. in National
Highways BOT Project
§ State Support Agreement - Pre-requisite for success of PPP
§ Land Acquisition
§ Utility Shifting – Speedy action
§ Forest Clearance
§ NOC from State Pollution Control Board
§ Development of 2-lane Highways and levy of user fee
Jaipur- Kishangarh – Service Road