Road Network in India, Public Private Partnership Financing & Case Study Narendra Sharma, SE(PPP), MoRT&H

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1 Road Network in India, Public Private Partnership Financing & Case Study Narendra Sharma, SE(PPP), MoRT&H

2 Functions of Ministry of Road Transport and Highways, Govt. of India Formulation of Policies relating to National Highways; Development, Maintenance & Management of National Highways; Formulation of Standards and Specifications for Roads and Bridges; Research & Development in the Highways sector. 2

3 NATIONAL HIGHWAYS : OVERVIEW 2 nd Largest road network with 5.5 Mn Kms National Highways 2% of road network, carry 40% traffic National Highways length ~120,000 KMS 65% of freight and 80% passenger traffic Top Recipient of PPP funding in

4 Lane-wise length of National Highway Network in India National Highways Less than 2 lane Million Kms 32,450 km 2 lane - 60,500 km 4 lane - 25,200 km More than 4 lane - 2,450 km 4

5 Major Programs/ Schemes The Ministry has taken up development of NHs/ roads under various phases of National Highways Development Project (NHDP), Special Accelerated Road Development Programme for the North East Region (SARDP-NE), Special Programme for Development of Roads in the Left Wing Extremism (LWE) affected areas, National Highways Interconnectivity Improvement Project (NHIIP) etc. Various phases of NHDP envisaged development of NHs to 4/6 lane and 2 lane NH standards, development of expressways, etc. Recently, Govt. of India has approved the proposal for investment approval of Bharatmala Pariyojana which includes development of about 9,000 km length of Economic Corridors, about 6,000 km length of Inter-corridor and feeder roads, about 5,000 km length of National Corridors Efficiency improvements, about 2,000 km length of Border and International connectivity roads, about 2,000 km length of Coastal and port connectivity roads, about 800 km length of Expressways and balance length of about 10,000 km of roads under NHDP. The programme is targeted for completion in The general principle for upgradation of roads under Bharatmala Pariyojana includes development of Economic Corridors primarily to 4/6 lane NH standards, Inter-corridor and feeder roads primarily to 4 lane NH standards and Border, International connectivity roads, Coastal and port connectivity roads primarily to 2 lane NH standards. 5

BHARATMALA From Point to point connectivity to corridor approach From lane expansion to new alignments From shortest route to connecting economically important nodes From expensive land acquisition

6 BHARATMALA From Point to point connectivity to corridor approach From lane expansion to new alignments From shortest route to connecting economically important nodes From expensive land acquisition to access control highways From urban choke points to dedicated ring roads Economic corridors Inter corridors Golden Quadrilateral Feeder routes NS EW corridor From unorganized small scale storage to large scale logistics From last-mile hiccups to smooth end-to-end connectivity 13,100 Km National Corridors 26,200 Km Economic Corridors 15,500 Km Feeder routes 5,300 Km International Connectivity 4,100 Km Port Connectivity 1900 Km Expressways 66,100 Km

7 BHARATMALA PHASE Category Description Total Length Identified (km) Upgrade proposed in Phase I* (km) Outlay in Phase I ($ Bn) National Corridors Efficiency Improvement Economic Corridors development Inter-corridor and Feeder routes development Lane expansion, de-congestion of existing National Corridors Connection of economically important production & consumption centers Inter-connection between economic corridors, first mile & last mile connectivity 13,100 5, ,200 9, ,500 6, Border and International Connectivity Roads Coastal and Port Connectivity Roads Connectivity to border areas and boosting trade with neighboring countries Connectivity to coastal areas to enable portled economic development 5,300 2, ,100 2, Expressways Greenfield expressways 1, TOTAL 66,100 24,800 $65Bn

8 BHARATMALA PHASE Bharatmala Pariyojana also includes: 1. Ring Roads - 28nos 2. Choke Points- 125 nos 3. Congestion Point- 68 nos

9 GOING STRONG Construction target ~ 15,000 km for Award target ~ 45,000 km for next 3 years 18,000 16,000 Road length (in KMs) 16,271 17,100 14,000 12,000 10,000 8,000 6,000 4,000 4,225 4,410 3,169 7,980 6,061 10, , Constructed Awarded

10 MODES OF PARTICIPATION BOT Toll BOT Annuity Hybrid Annuity Model Engineering, Procuremen t & Construction (EPC) Model DBFOT DBFOT DBFOT DBT Government Support None None 40% support 100% Toll Collection Investor Government Government Government O&M Investor Investor Investor Government

11 HYBRID ANNUITY MODEL 40% of Project Cost (Construction Support) by Govt. COD 1. Annuity payments (biannually) for 15 years 2. O&M payments 3. Interest payments (on reducing Bank Rate + 3%) Hybrid Annuity Project 60% of Project Cost arranged by Concessionaire for Financial Close Toll collection by Govt. O&M by Concessionaire Bid Parameter NPV of the quoted Bid Project Cost + NPV of the O&M Cost for the entire Operations period Construction Period Operations Period

12 NHAI TARGETS UNDER BHARATMALA Year Construction Rate Total Km constructed , , , , , ,700 Total 34,877 Construction rate increasing at 10-20% yoy Construction Mode Proportion : HAM - 60%, EPC - 30%, BOT (Toll) - 10%

13 GOVERNMENT FACILITATING INVESTMENTS We welcome participation from foreign firms in road construction 4 InvITs (Infrastructure Investment Funds) already approved by NHAI Creation of National Investment and Infrastructure Fund $3bn of annual equity commitments from the Government of India Ministry facilitating investments through policy initiatives In close coordination with Ministry of Finance, RBI use of long term sources of funds like pension & insurance funds, encouraging long term debt re-structuring, etc Innovation in the PPP - Hybrid Annuity Model

14 TOT MODEL OVERVIEW Overview of the TOT Model COD NHAI securitizes the toll collection upfront Public Funded Project Construction Operations for two years Toll Collection by NHAI TOT Concessionaire Operates, Maintains and Tolls the project for concession period of 30 years

15 SALIENT FEATURES OF MODEL Upfront payment of lump-sum amount Long term Toll Collection rights O&M obligations with the Concessionaire Appointment through competitive bids/auctions

16 FIRST BUNDLE OF TOT - LAUNCHED Andhra Pradesh Stretch NH Length (km) Siddhantham Gundugolanu NH Diwancheruvu Siddhantham NH Annavaram (Tuni) Diwancheruvu NH Ankapalli Annavaram (Tuni) NH Ichhapuram Narsannapeta NH Puintola Ichhapuram NH Total Gujarat: 3 Stretches ~239km Gujarat Stretch NH Length (Km) Bamanbore Garamore 8A Garamore Samakhaiyali 8A Andhra Pradesh: 6 Stretches ~441.6km Porbandar Bhiladi - Jetpur 8B Total Total Length = Km

17 Borrowings Plan - FY Particulars (Actual upto ) Domestic Borrowing (Tentative) 54 EC Capital Gain Bonds 4,452 6,000 Taxable Bonds LIC/EPFO/NSSF 28,500 28,500 Other Taxable Bonds (incl. Bharatmala Bonds) 2,375 17,500 Total Domestic Borrowings 35,327 52,000 International Borrowing Rupee Denominated Masala Bond 3,000 10,000 Total International Borrowing 3,000 10,000 Grand Total 38,327 62,000

18 CASE STUDY Design, Engineering, Procurement, Construction, operation and maintenance of four laning of Cuddapah Kurnool section of NH- 18 from the existing KM to KM in the State of Andhra Pradesh under NHDP- Phase III BOT Basis 18

19 Salient Features of Projects (i) Length Km (ii) TPC Rs.1585 Cr. (0.26 Billion USD) (iii) Concessionaire M/s Rayal Seema Expressway Pvt Ltd (iv) Consortium Members M/s KMC Projects Ltd. (v) Premium/Grant Grant Rs Crore (vi) Date of signing of Concession Agreement (vii) Construction period 912 days (30 months) (viii) Concession Period 30 years(including construction period of 912 days) (ix) Appointed Date (x) Scheduled completion (xi) Likely Completion (xii) PCOD for part length (88.15 km)

20 Events In the starting, there was no problem in the project and achieved about 70% physical progress in Sept, Then after, due to financial crisis with the concessionaire, there was less progress in the project. Some other reasons for slow progress were land acquisition issues, additional work, GAD approved by Railway Department was different from the Scope of work. The matter was discussed with concessionaire and options were explored like- one time fund infusion, grant of Provisional Completion for Part length so that funds shall be available with concessionaire. Concessionaire also arranged funds from other Financial Institution other than Main lender. 20

21 Steps taken by Govt. of India or NHAI Authority issued Provisional completion certificate for part length (for which provision was not in the agreement) in Oct, However, Authority asked Concessionaire that they will not raise any claim against Authority defaults in future. Authority approved a proposal of fund infusion for the project. Now, the progress of the project is about 98%. 21

22 Similarity in Road Projects and Urban Development Projects 1. Huge Land Acquisition 2. Shifting of Utilities and its relocation 3. Co-ordination with different agencies 4. Require huge funding

23 Some Urban Development Projects taken on PPP Mode 1. In Delhi (ring road) opposite AIIMS in East Kidwai Nagar MoUD has entrusted NBCC the project of re-delopment of GPRA at East Kidwai Nagar on 86 acres land with estimated cost of Rs cr inclusive of maintenance period of 30 years. Re-developed space will be available for lease of Central Gov./PSUs etc Cost of construction shall be meet out through lease of entire office space & 10% Residential Space.

24 2. Amaravati, the People s capital of Andhra Pradesh

Development of Road Infrastructure in India

Development of Road Infrastructure in India By Nirmal Jit Singh Director General (Road Development & Special Secretary) Ministry of Road Transport & Highways Road Network in India Total Road Length about