India Technology Issues Trends Roads Highways PDF

Roads and
highways
sector–Current
trends and
future
road map
September 2019
home.kpmg/in
2 Roads and highways sector - Current trends and future road map
KPMG in India Foreword

I am happy to share with you KPMG impact. In the realm of road is also a key requirement. New
in India’s paper on ‘Roads and transport, the Motor Vehicles asset monetisation options like
highways sector – Current trends (Amendment) Act-2019, enhanced Infrastructure Investment Trusts
and future road map’. focus on road safety and adapting (InvIT)s and securitisation of toll
technology enabled solutions also revenue are being considered. All
The sector has been witnessing
played major roles. above are expected to be taken
high construction rates over the
forward in a sustainable manner,
last few years. A host of policy The current focus on construction
keeping in mind green initiatives
initiatives undertaken by the of roads and highways is expected
and increasing focus on e-mobility.
government in recent past covering to continue over the next five
aspects like expeditious land to six years. Post that the focus CII INFRANET 2019: Building
acquisition, solving operational is expected to shift to efficient Roads and Highways: IMPERATIVE
issues, revival of languishing operations and maintenance FOR NATION’S GROWTH is
projects and time bound resolution of roads and enhanced service an important milestone in the
of disputes in an affordable manner provisions to road users. In addition journey to sustainable and focused
have gone a long way in ensuring an to this, multi-modal integration development of the sector.
enabling environment. In addition, is expected to gain further
As the ‘Knowledge Partner’ to the
launching of the Bharatmala significance, both in passenger
conference, KPMG has prepared
Pariyojana in 2017 and introducing and freight transport. Road safety
this elaborate paper covering
new project implementation and increasing use of technology
various pertinent aspects of the
models like the hybrid annuity, are other areas of priority for the
roads and highways sector.
operational asset monetisation government. Better utilisation
models like Toll- Operate-Transfer of existing sources of funding I am confident you will find the
(TOT) have also made a significant and searching for new avenues paper informative and thought
provoking.
Davinder Sandhu
Partner and Head
Transport Sector
Infrastructure, Government and Healthcare
© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
3
CII Foreword
India is one of the fastest growing the roads and highways sector agreed by arbitration panels and
economies and is entering into an is commendable. India has against variations carried out after
era where infrastructure will be undoubtedly become the fastest due approvals etc are causing too
at the core of country’s economic highway developer in the world much of stress in the system.
development. In recent years, the with 27 kms of highways built Similarly, methodology of TOT
government has embarked on each day and the aim is to increase bidding, approvals for change of
series of measures to accelerate this target to 40 Kms a day. New ownership of assets and modalities
infrastructure development. bids have however slowed down of payments for
considerably and many major Engineering-Procurement-
As a result of some of these
Detailed Project Report Construction (EPC) contracts need
initiatives, India’s rank in terms of
(DPR)s have been cancelled, immediate attention. Government
overall infrastructure development
raising questions about the should consider addressing
as per the Global Competitive
pipeline. industry’s apprehensions arising out
Ranking of the World Economic
of the recent news of NHAI’s role
Forum, has vastly improved from The sector is confronted by
as developer or only asset manager.
87th position in 2015 to 63rd a number of challenges viz.
Lenders’ reluctance to provide
position in 2018. competing demands leading to
credit or non-fund based support is
insufficient budgetary support,
The Roads and Highways Sector also resulting in more challenges.
contracting companies in
plays a critical role in the growth of
financial stress, lack of feedback Therefore, there should be broad
Indian economy as around 64.5
mechanism, challenges in bidding based consultations with active
per cent of goods are transported
process, shortcomings in DPR involvement of all the stakeholders
via road and nearly 90 per cent of
preparation amongst others. to chalk out a long term strategy for
passenger traffic is by road. The
Pending payment against routine roads and highways.
Government of India’s efforts to
bills, against awards already
fasten pace of construction in
Parvesh Minocha
Chairman, CII Northern Regional Committee on Infrastructure
Chairman, CII INFRANET 2019, Group Managing Director
Feedback Infra Pvt Ltd
Table of
Contents
1. Executive Summary................................................................................... 06
2. Introduction to the roads and highways sector ................................... 08
2.1 Sector background 10
2.2 Sector trends 12
2.3 Current priorities for the sector 14
3. Evolution of PPP in roads and highways .............................................. 16
3.1 Risk Perception in highway projects 18
3.2 Evolution of PPP in road sector in India 21
3.3 Future of PPP in India 22
4. Roads and highways sector issues ........................................................ 24
4.1 Overview of issues in the sector 26
4.2 Financing issues 27
4.3 Operational issues 27
4.4 Other issues 28
5. Recent policy initiatives by the Government ....................................... 30
5.1 Operational initiatives 33
5.2 Revival of languishing projects 33
5.3 Amicable dispute resolution 34
5.4 Other initiatives 34
6. Road sector financing in India ................................................................ 36
6.1 Fund requirement 38
6.2 Sources of fund 38
7. Global perspective in highways sector ................................................. 40
7. 1 Information, Communication and Technology (ICT) in roads 42
7. 2 Funding from multilaterals 43
8. Recent technological advancements in the sector .............................. 44
8.1 Types of technological advancements in the sector 46
8.2 Technological initiatives in road infrastructure 47
8.3 Technological initiatives in public transportation 47
8.4 Technological initiatives in road safety 47
9. Investment/ business possibilities ......................................................... 48
9.1 Stakeholders involved in roads and highways sector 50
9.2 Opportunities for developers, developers and operators 50
9.3 Opportunities for investors/lenders 51
9.4 Opportunities for consultants 51
10. Road map for the roads and highways sector ....................................... 52
10.1 Way Forward 54
7
01. Executive Summary

India has the second largest road Trusts (InvIT) and securitisation approach levers are to better costs
network in the world. Ministry of toll revenue are also under across the various phases of road
of Road Transport and Highways consideration. development, improving existing
(MoRTH) is planning to develop sources of funding and exploring
MoRTH is targeting completion
around 60,000 km of roads in the new avenues and policy reforms
of 60,000 km of NH in the next
next five years at about 40km/ including new PPP models.
five years1 at an average road
day. Road construction and award
construction rate of 40 km per day. Global trends in infrastructure
trends in recent years also give
Assuming average construction indicate increased focus on
optimism of achieving such high
cost of approximately INR30 crore innovations, use of technology
targets. Focus continues to be
per km (including land acquisition tools based on data and analytics to
on Bharatmala Pariyojana, with
cost), and factoring in inflation unlock operational efficiencies, shift
added stress on multimodal
for road construction cost at a of focus to developing economies
integration, road safety, increasing
conservative 3 per cent, the total and mainstreaming of sustainability.
use of Information Technology
funding requirement over five Roads and highways sector is not
(IT) applications, augmentation
years is estimated at approximately an exception. The role of roads
of existing funding sources and
INR19 lakh crore which amounts to and highways sector in the overall
emphasis on green initiatives.
average annual fund requirement transport sector continues to be
Also, enhanced passenger facilities
of approximately INR3.8 lakh crore. globally recognised.
and logistics efficiency are major
Additionally, many issues have been
considerations. Focus has been on institutional
plaguing the roads and highways
integration of transport
Public Private Partnership (PPP) sector in India. Such issues include
departments, increasing
is the need of the hour. With aspects like land acquisition,
use of green principles in
reference to PPPs, roads and streamlined operations, financing,
road development, adoption
highways has a long history. operation and maintenance (O&M)
of e-mobility as a service,
The journey started toward the and revival of languishing projects.
implementation of integrated
beginning of the millennium
The government has been taking payment mechanisms for multi-
with road asset development
a number of initiatives to solve modal transport, increasing use of
and operation models like Build
the various issues. These are in big data analytics, other technology
Operate Transfer (BOT) (Toll) and
the form of operational initiatives initiatives and flexible road pricing
BOT (Annuity) and attracted high
like process streamlining and initiatives. Enhanced road user
participation. This gradually waned
various technological initiatives to facilities is a focus area globally.
post 2012 due to various issues
increase operational efficiencies,
including aggressive bidding and Highways development in the
measures to revive languishing
over-leveraged balance sheet country for bridging the required
projects like equity divestment,
of developers, shortcomings infrastructure gap is likely to be
premium deferment and one time
in project preparation activities over in the next five to six years and
fund infusion, amicable dispute
and land acquisition issues. The development/construction activities
resolution by forming Society for
Hybrid Annuity Model(HAM) was could reduce progressively. A
Affordable Redressal of Disputes
introduced to reinvigorate PPP shift is expected from highway
(SAROD) and other initiatives like
participation in the road sector after construction/ development to
continuous evolution of PPP mode,
interest in BOT projects waned. provision of quality service to
developer friendly reforms for HAM
It focused on proper allocation highway users, enhanced use of
projects and safety related policies.
of risk among partners. Further, technology applications, adoption
operational asset monetisation Road development costs are of safety solutions, promoting
models have gained prominence increasing and funding is getting sustainability and augmenting
recently with the advent of the even more constrained. Increasing existing sources of finance.
Toll-Operate-Transfer (TOT). Other costs, limited available funding
asset monetisation options like and waning interest of private 1. BJP manifesto: 60,000 kilometres of
use of Infrastructure Investment sector in PPPs are challenges. The highways to be built in 5 years, Business
Today, April 2019
02
Introduction
to the roads
and highways
sector
2.1 Sector background

Creation and operation of quality India has the second largest road Development Corporations and the
road infrastructure continue to be network in the world at 58.98 lakh Border Roads Organisation (BRO)5.
major requirements for enabling km. Out of this around 1.14 lakh
Roads in the jurisdiction of state
overall growth and development km are National Highways (NHs)2.
governments are under different
of India in a sustained manner. Significantly, NHs constitute around
categories like State Highways
Bridging of existing infrastructure 2 per cent of the total road network
(SHs) and Major District Roads
gaps and creating additional in the country but carry about 40
(MDRs). They are being developed/
facilities to cater to the increasing per cent of the road traffic3. The
upgraded through State PWDs
population are equally important. density of India’s highway network
and State Road Development
Apart from providing connectivity -- at 0.66 km of roads per square
Corporations. Pradhan Mantri
in terms of enabling movement of kilometer of land – is similar to that
Gram Sadak Yojana (PMGSY) is
passengers and freight, roads act of the United States (0.65) and
being implemented for rural roads
as force multipliers in the economy. much greater than China’s (0.16)
through the Ministry of Rural Affairs
Further, roads play a significant or Brazil’s (0.20)4.
with active participation by state
role in times of natural calamities,
The National Highways governments. Further, roads within
wars and other such events in
Development Project (NHDP) urban areas are mostly with Public
terms of timely evacuation of the
in the context of NHs is nearing Works Department (PWDs) and
impacted population, carriage of
completion- in seven phases. Urban Local Bodies (ULB)s.
relief material and other associated
Later, other highway development
movements. Other innovative uses
programmes like Special
of highways include emergency
Accelerated Road Development
landing and take off for fighter
Programme for Development 1. Speech of Nirmala Sitharaman, Union
planes. Government takes
of Road Network in the North Budget, July 2019
cognisance of this requirement and
Eastern States (SARDP-NE), and 2. Industry and Infrastructure, Economic
road infrastructure remains to be a Survey 2018-19, Economic Survey,
the National Highways Inter-
focus area. Accessed August 2019
connectivity Improvement Project
The honurable Finance Minister (NHIIP) were also taken up by 3. Roadways, Business.gov.in, Accessed
July 2019
in her Budget Speech for 2019-20 the Ministry of Road Transport
4. Transportation in India, World Bank Group,
re-emphasised the importance and Highways (MoRTH). Further,
Accessed July 2019
of connectivity and transport the Bharatmala Pariyojana is
5. KPMG in India’s analysis, 2019 based on
infrastructure: currently ongoing. For majority secondary research
of the projects under NHDP and
“Connectivity is the lifeblood of
Bharatmala Pariyojana, National
an economy. The government
Highways Authority of India (NHAI)
has given a massive push to all
is the implementation agency.
forms of physical connectivity
Other NH related programmes/
through Pradhan Mantri
works are being implemented
Gram Sadak Yojana, industrial
through agencies like National
corridors, dedicated freight
Highways Infrastructure
corridors, Bhartamala and
Development Corporation Ltd
Sagarmala projects, Jal Marg
(NHIDCL), State Public Works
Vikas and UDAN Schemes.1”
Department (PWD)s, State Road
11
State Governments have a Figure 2: Length of NH awarded and constructed (in kms)9
significant role to play in ensuring For 2014-15 to 2017-18:
connectivity beyond NHs – Awarded length = 51,073 kms
Constructed length = 28,531 kms
development of Non NH roads
like SH, MDR, Other District
Roads (ODRs), ensuring last 18,000 17,055
For 2010-11 to 2013-14:
15,948
mile connectivity, providing 16,000 Awarded length = 25,158 kms
Constructed length = 16,505 kms
strategic locations for logistic 14,000
facilities and passenger transport 12,000
amenities. States have varying 10,279 10,098
10,000 9,794 9,829
levels of maturity in terms of road 7,972 8,231
8,000
infrastructure development. Top 6,061
6,000 5,732
5 states as per length of NHs are 4,500 4,260 4,410
2,013
shown below: 4,000 3,169
1,916
2,000
Figure 1: Top 5 states by 0
length of NHs in India (in km)6
2010-11
2012-13
2011-12
2015-16
2016-17
2017-18
2013-14
2014-15
Length of NHs (in km)
20,000 15,436 Length of NH awarded (in kms) Length of NH constructed (in kms)
15,000
10,000 8,711 7,906 7,854 6,791
5,000
0 MoRTH is planning to construct 70 per cent during the same period,
around 60,000 km of National as highlighted in the table at
Madhya Pradesh
Maharashtra
Uttar Pradesh
Karnataka
Rajasthan
Highways in the next five years7. Figure 2.

This underlines the importance of The above trend highlights the
roads and highways development growth story in the road sector –
in India. A major reason is that in where pace has picked up recently.
addition to being a major carrier This pace is expected to gain
Issues plaguing state governments for passenger traffic, roads and further ground in the future, with
include adequate identification and highways also play a key role in the ambitious targets set by the
prioritisation of projects, funding carrying freight across the country. ministry and the implementation
shortfall in project execution, limited The share of road in freight of the Bharatmala Pariyojana.
institutional capacity to implement transport is approximately
projects and absence of adequate 60 per cent8.
tolling guidelines and policies. In Road award and construction 6. Total Length of National Highways in the
addition to budgets, multilateral trends have significantly increased
Country, Press Information Bureau, July
funding has been assisting the 2017
in recent years, highlighting the
state governments to facilitate outstanding work being done by the
7. BJP manifesto: 60,000 kilometres of
institutional capacity building, highways to be built in 5 years, Business
government in the sector recently. Today, April 2019
providing Project Management The length of National Highways 8. Road Transport Scenario in India, Press
Consultancy (PMC) services, awarded has almost doubled in Information Bureau, January 2013
supervision support and public the years FY15 to FY18 compared 9. Achievements of four years, Ministry of
transport and logistics facilities to FY11 to FY14. Length of NHs Road Transport and Highways, Accessed
enhancement measures over and constructed has increased by July 2019
above road project development.
2.2 Sector trends

Lately the focus of the sector is a. Bharatmala Pariyojana Under Bharatmala Phase -I,
not only on efficient award and Programme development/upgradation of 34,800
construction of roads, but also on km of NHs is envisaged over a
Approval of the major highway
smooth movement of passenger five-year period (2017-18 to 2021-
sector programme Bharatmala
and freight through enhanced 22) at an outlay of INR5,35,000
Pariyojana Phase I by the Cabinet
logistics efficiency. This has crore10. Summary of the approved
in October 2017 reiterated the focus
been the guiding principle behind components under the programme
is on optimising efficiency of freight
Bharatmala Pariyojana. is as follows:
and passenger movement across
the country.
Table 1: Salient features of the Bharatmala Pariyojana11

Sr.No. Components Length -km Outlay -Rs crore
a. Economic corridors development 9,000 1,20,000
b. Inter-corridor and feeder roads 6,000 80,000
c. National corridors efficiency improvements: 5,000 100,000
d. Border and international connectivity roads 2,000 25,000
e. Coastal and port connectivity roads 2,000 20,000
f. Expressways 800 40,000
Total: 24,800 385,000
Balance road works under NHDP 10,000 1,50,000
Total 5,35,000
Upto October 2018, 6,407 km of an estimated cost of INR12,000 Expressway, Bangalore-Chennai

roads had been awarded under the crore13 Expressway, etc16.
Bharatmala Pariyojana12.
• Setu Bharatam: This project c. Road Transport - focus on
b. Implementation of important aims to replace level crossings on smooth traffic movement
projects and expressways NHs with ROBs/RUBs. This aims and enhancement of logistics
to construct 174 such structures14 efficiency through
A number of important projects
multi-modal integration
have been taken up in recent • Eastern peripheral and western
years. Few of the important ones peripheral expressway: These Road transport is vital to India’s
are: two projects connect NH-1 and economy. India’s road network
N-2 from western and eastern carries more than 60 per cent of
• Char Dham Mahamarg Vikas
side of Delhi15. its freight and about
Pariyojana: Project envisages
85 per cent of passenger traffic17.
development of easy access Other such important
Our growing economy has
to the four dhams in India - expressways taken up for
witnessed a rise in demand
Gangotri, Yamunotri, Kedarnath construction are Delhi-Meerut
for transport infrastructure and
and Badrinath. Development of Expressway, Vadodara-Mumbai
services.
889 km of roads is expected at Expressway, Delhi – Mumbai
10. Shri Gadkari says highways works worth 12. Year end Review: Ministry of Road Transport 15. Year end Review: Ministry of Road Transport
Rs 8 lakh crore will begin before the end of and Highways, Press Information Bureau, and Highways, Press Information Bureau,
2018 under Bharatmala Pariyojana, Press December 2018 December 2018
Information Bureau, October 2017 13. Year end Review: Ministry of Road Transport 16. Year end Review: Ministry of Road Transport
11. Shri Gadkari says highways works worth and Highways, Press Information Bureau, and Highways, Press Information Bureau,
Rs 8 lakh crore will begin before the end of December 2018 December 2018
2018 under Bharatmala Pariyojana, Press 14. Year end Review: Ministry of Road Transport 17. Transportation in India, World Bank Group,
Information Bureau, October 2017 and Highways, Press Information Bureau, Accessed July 2019
December 2018
13
Passenger transport is gaining A number of measures have and services. A mobile application
more of significance - increasing been undertaken to ensure system has also been launched
mobility needs of the Indian easy and economic passenger for tag purchases and top up of
population due to enhanced and freight movement in recent FASTags called MyFASTag.
urbanisation and need to move years. Some of such measures
f. Initiatives related to
more for livelihood, education, are revision of axle weight
augmentation of existing
healthcare, fulfilment of social to bring down logistics cost,
funding sources
needs etc. Requirements are launch of ranking systems for
improved public transport toll plazas, revision in maximum There is a gap between the actual
facilities through enhancement speed of vehicles, encouraging funding required in the sector,
of physical infrastructure development of Multi Modal and the funding which has been
and rolling stock, operational Logistic Parks (MMLPs) incoming in the sector. This
efficiency and enhanced and Inter modal stations for funding gap needs to be reduced
passenger facilities including passenger transport. by exploring alternate sources of
safety and information financing. A number of options
d. Focus on Road Safety
availability. have been taken in this direction
Road safety has been taken up as such as raising capital from Life
In today’s scenario of high road
a priority. A number of initiatives Insurance Corporation, Employee
congestion, and increasing
have been taken regarding this, Provident Fund Association and
pollution, the focus is shifting
such as black spots rectification, issuing rupee-denominated masala
towards increasing use
setting up driver training institutes, bonds in London Stoke Exchange.
of public transportation.
SukhadYatra app and toll-free Asset monetisation models like
Important considerations
emergency number, capacity Toll-Operate-Transfer (TOT) have
are seamless integration of
building of officers, etc. Trainings already been implemented and
multimodal options, first and
have been conducted for NHAI Infrastructure Investment Trusts
last mile connectivity, integrated
field officers, concessionaires, (InvITs) and securitisation of toll
technology solutions enabled
consultants, contractors, etc. revenue are also being explored by
ticketing, enhanced passenger
Road safety audit is mandatory NHAI.
safety and information
in all NHAI projects through
availability g. Emphasis on green initiatives
independent safety consultants19.
Freight transportation in the A number of green initiatives
e. Increasing use of Information
country is predominantly road have also been taken up in the
Technology (IT) applications
based– more than 60 per cent recent years to check the issue
of total freight. Issues include IT applications are being of environment pollution. Battery
high logistics cost– around 14 progressively mainstreamed in operated vehicles, and vehicles
per cent of the nation’s GDP all aspects of the road sector. driven on methanol and ethanol
as against 8-9 per cent for A number of IT applications have been exempted from permit.
developed nations18, existing have been developed to aid A Green Highway Division has
logistics inefficiencies - delays on ground operations. Some been set up by NHAI to carry out
in interstate border crossing, major IT applications are; use plantation along highways and
manual toll collection, non- of Electronic Toll Collection medians. A number of initiatives
availability of bypasses for busy (ETC), development of Bidder have been taken in Union Budget
urban stretches and integrated Information Management System, 2019-20 to encourage adoption
logistics facilities like Multi Bhoomirashi, etc. MoRTH, NHAI of electric vehicles (EVs), such as
Modal Logistics Parks. and NHIDCL have also adopted reduction of GST on EVs and tax
an e-procuring and e-tendering benefits for buying an EV.
system for procurement of goods
18. Debunking India’s logistics myths, Livemint,
March 2018
19. Annual Report 2017-18, National Highways
Authority of India, accessed August 2019
2.3 Current priorities for the sector

The current sector trends give an indication of the various priorities for the sector. This can be
visualised as below:
Figure 3: Current priorities in the road sector20
Key sector trends
1 2 3 4 5 6
Bharatmala Ease and Focus on Increased Alternate Emphasis
Pariyojana and economy of road safety use of IT sources of on green
other projects traffic applications funding initiatives
movement
Priorities
1 2 3 4 5 6
Maintenance Focus on Bettering costs, Adoption of
Increase Adoption of
and capacity multimodal exploring new environment
priority on more IT enabled
augmentation transport fund sources friendly green
road safety solutions
of huge road integration and new PPP transport
network models solutions
Bharatmala Pariyojana Phase I of quality services to road users. Both the factors are swiftly gaining
is to continue until 2022. Post This may result in reorientation of significance and this is expected to
that, infrastructure creation is skills and sectoral requirements continue in the future.
expected to continue at a reduced and the government needs to start
Other priority areas include focus
level and eventually a saturation planning now for the same. Private
on multimodal transport integration
is to be expected. Construction is capabilities and efficiencies in
and bettering costs, exploring new
progressively expected to decline operation and maintenance of road
funding sources and introducing
post that phase. assets will be of importance.
new Public Private Partnership
During that phase, the focus may In addition to this, the current focus (PPP) modes. Sustainable green
shift to efficient operation and on road safety and increased use development is also gaining
maintenance of the existing road of IT applications is only expected significance.
assets and sustained provision to increase in the coming years.
20. KPMG in India’s analysis, 2019 based on secondary research
15
03
Evolution of
PPP in roads
and highways
3.1 Risk Perception in highway projects

Public Private Partnerships (PPPs)
have been a major contributor to
the success story of the roads Financing Construction
and highways sector in India. The risk risk
effectiveness, efficiency and
acceptance of a PPP model hinges
on appropriate risk allocation
between the government and
private developers. Revenue Operation and
A brief understanding of various risk maintenance
risks in a PPP road sector project is risk
as follows:
Figure 1: Various risks in a

PPP road sector project Construction risk O&M risk
Financing risk Revenue risk
Project development Construction phase Operation phase

phase
d. Operation and
a. Financing risk b. Construction risk c. Revenue risk
maintenance risk
In the construction A project faces a The financials of a road Adequate operations

phase of PPP projects, number of intrinsic project are dependent and maintenance
financing is done by a risks during on the revenue the is required in a road
combination of debt construction. This road project generates. asset. The operations
and equity and in poses a threat to the Primary and only and maintenance
cases, supported by project because delays source of revenue expenses consist
government grants. in the execution can in the case of a NH of the following
Equity is usually put lead to overall stunted project is toll revenue. heads – toll plaza
in by the developer/ development. So So the toll revenue risk expenses, routine
promoter of the construction risk is a is a critical factor for maintenance, major
project. Debt is put in major risk to consider a project, as the cash periodic maintenance,
usually by a financial in a road project. flows generated are etc. In addition to
institution like a bank, essential for servicing this, sometimes
through the developer. of debt, meeting equity climatic situations
There is a risk of the return expectations entail unexpected
equity and debt not and enabling efficient maintenance
coming into the project operation and requirements on the
at the appropriate time, maintenance of the road assets.
resulting in cost and project.
time overruns.
19
PPP modes have been used in India for both development and operation and maintenance of road assets.
The major PPP modes prevalent in India are as follows:
a. PPP modes for road asset of up to 40 per cent of the designing, building, financing,
development – BOT (Toll), BOT project cost which is paid by operating, maintaining and
(Annuity) and Hybrid Annuity the government in the form of transferring the project to
Mode (HAM) a Viability Gap Funding (VGF). the authority at the end of
The concessionaire earns the concession period. The
b. PPP modes for road asset
revenue primarily in the form of responsibility for tolling on
operation and maintenance–
toll revenue, which depends on the road stretch is with the
Operate- Maintain – Transfer
traffic that needs to pay toll on government. The concession
(OMT), TOT
the road stretch. Toll rates are period is project specific
While the asset development based standardised and regulated by construction period and a
PPP model has been the more the government through rules. fixed operation period of 15
traditional PPP model, operation years. An inflation adjusted
b. BOT (Annuity)2
and maintenance based PPP construction support of 40 per
models like TOTs are also gaining In a BOT (Annuity) project, the cent of the bid project cost is
significance. concessionaire is responsible for provided by the government
designing, building, financing, to the concessionaire during
A brief description of the various
operating, maintaining and the construction period, in five
road asset development PPP
transferring the project to equal installments of 8 per cent
modes in existence in India is as
the authority at the end of each of the bid project cost.
follows:
the concession period. The Hence, only 60 per cent of the
a. BOT (Toll)1 responsibility for tolling on bid project cost is to be arranged
the road stretch is with the by the concessionaire during
In a BOT (Toll) project, the
government. The concessionaire the construction period. This is
concessionaire is responsible for
earns revenue primarily in the paid to the concessionaire by the
designing, building, financing,
form of pre-determined semi- government in the form of semi-
operating, maintaining, tolling
annual annuity payments which annual payments. In addition to
and transferring the project
are made by the government to this, interest on reducing balance
to the authority at the end of
the concessionaire. and operations and maintenance
the concession period. The
concession period is around 30 cost are also paid semi-annually
c. Hybrid Annuity Mode (HAM)3
years, but is project specific. by the government to the
In a HAM project, the concessionaire.
Depending on the viability of
concessionaire is responsible for
the project, there is a provision HAM model is explained as below:
Figure 2: HAM model – key features4
1. Annuity payments (biannually) for 15 years

40 per cent of project cost
(construction support) by govt. 2. O&M payments
COD 3. Interest payments (on reducing balance
@ bank rate + 3%)
Hybrid Annuity Project
Toll collection by O&M by

govt. concessionaire
arranged by concessionaire for
financial close
Operations period
Bid parameter – NPV of the quoted bid project
Construction period cost + NPV of the O&M cost for the entire
operations period
1. KPMG in India’s analysis, 2019 based on 3. KPMG in India’s analysis, 2019 based on
secondary research and industry discussions secondary research and industry discussions
2. KPMG in India’s analysis, 2019 based on 4. KPMG in India’s analysis, 2019 based on
secondary research and industry discussions secondary research and industry discussions
A brief snapshot of risk sharing in the various PPP road development projects is mentioned below:
Table 1: Risk parameters for road PPP models5
Mode Financing risk Construction risk Traffic risk O&M risk
Reducing risk for BOT (Toll) Concessionaire Concessionaire Concessionaire Concessionaire

concessionaire
BOT (Annuity) Concessionaire Concessionaire Authority Concessionaire
HAM Concessionaire (partly) Concessionaire Authority Concessionaire
In addition to the road funded highway projects, long- road asset is transferred to
development models, the term O&M responsibilities the concessionaire without
maintenance of such a huge and tolling rights are assigned any rights for capacity
network of national highways to developers/investors after augmentation. Concessionaire
will require efficient operation construction completion. is given the right to collect toll
and maintenance of the road This is done after a few years on the road asset. In return,
assets. In addition to this, there of successful operation of a the concessionaire pays
is an opportunity to monetise project once the traffic on it an agreed premium to the
future toll earnings of completed stabilises. An upfront fee is government. The model brings
highway assets. paid by the concessionaire to in private sector efficiencies in
the government in exchange operation and maintenance of
A brief description of the various
of the right to toll, operate road assets. Responsibilities
road asset operation and
and maintain the road asset of the concessionaire include
maintenance modes in existence
for the concession period. routine maintenance, periodic
in India is as follows:
In the current scenario, the maintenance, traffic incident
a. Toll-Operate-Transfer (TOT) concession period is 30 years. management and traffic flow
management.
This is an effective model that b. Operate-maintain-transfer
ensures efficient Operation (OMT) An understanding of the
and Maintenance (O&M) of various PPP modes is critical
Under the OMT mode, the
highways on a long-term basis to understand the road
concessionaire operates and
and generates resources sector scenario in India. The
maintains the completed
upfront that can be invested in next section discusses the
road asset for a smaller
new highway projects. In this evolution of PPP in the road
duration - ranging from four
model, for operational public sector in India.
to nine years. An operational

secondary research and industry discussions
21
3.2 Evolution of PPP in road sector in India

PPP in the road sector in India has Figure1: Length of road projects awarded to BOT private players (in km)6
passed through a number of distinct
phases: Projects awarded to BOT private players (in kms)
a. Build-Operate-Transfer 7,000
6,144 6,067
(Toll and Annuity) 6,000
b. Hybrid Annuity Mode 5,000
c. Toll Operate Transfer 4,000
A brief description of the phases is 3,000 2,677

provided below:
2,000
a. Build-operate-transfer 877
1,116
873
1,000 742
(Toll and Annuity) 369 464 470
0
An investor friendly climate in FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
the first decade of the twenty-
first century attracted private
investment into the roads and unrealistic traffic projections and semi-annual payment streams
highways sector. quite a few projects getting stalled by the government as described
in the construction. This resulted earlier which cumulatively form
However, as an aftermath of the in decline of interest in BOT mod- the revenue earned by the
global economic meltdown in 2008- els post 2013, which paved the concessionaire irrespective of
09, major issues cropped up for the way for the emergence of HAM in toll revenue collection. Hence,
sector. B.K. Chaturvedi Committee 2016. no traffic related risk is borne by
was formed in 2009 to work out the concessionaire.
suitable recommendations, which b. Hybrid Annuity Mode (HAM)
included the following: The introduction and strong
HAM was introduced to
implementation of HAM has seen
• Suitable modifications in the reinvigorate PPP participation in
HAM become the preferred PPP
template project documents the road sector after interest in
mode in India. Till March 2018,
BOT projects waned. The main
• Empowering MoRTH to make 112 road projects of 6,325 km in
advantages to the developer
amendments in Request for length had already been awarded
include the following:
Qualification (RFQ)/Request under HAM. The estimated cost
for Proposal (RFP) on basis of • To reduce the initial funding of these projects is approximately
recommendation from NHAI requirement in PPP projects: INR1,26,750 crore7.
As 60 per cent of the bid project
• Waterfall mechanism in mode of In addition to introduction of HAM
cost is to be arranged by the
implementation of projects. which resulted in reduced initial
concessionaire, assuming a
investment requirement from the
Significant improvements in private 70:30 debt equity ratio, around
government in highway projects,
participation were observed. Private 18 per cent of project cost to be
efficient O&M of completed
sector participation in BOT projects put in as equity is required to
highway assets and augmenting
peaked till Financial Year (FY)12. But be put in by the concessionaire
existing sources of funding for
a steep decline in PPP participation during the construction period
the sector was also thought to be
was observed in FY13 and FY14 as opposed to 30 per cent in a
important. A model was introduced
with many viable projects unable BOT project. This reduces the
by the government that takes
to attract even a single bid. This is initial equity requirement and
care of O&M requirements of an
evident from the Figure1 which encourages participation by
increasing highway network and
shows the projects awarded to mid-sized developers to invest
also facilitates monetisation of
BOT private players in km: in PPP projects. Further, debt
toll receivables for operational
requirements goes down from
Reasons include over-leveraged highways –this was the Toll
70 per cent to around
financials for limited number of Operate Transfer (TOT) model.
highway developers in the country,
some banks reaching the ceiling • To eliminate traffic risk of the 6. Transportation in India, World Bank Group,
Accessed July 2019
as per sectoral exposure norms, concessionaire: Concessionaire
7. Achievements of four years, Ministry of Road
aggressive bidding based on is paid three pre-determined Transport and Highways, Accessed July 2019
c. Toll-operate-transfer (TOT)
Three TOT bundles have been floated by NHAI so far. Details of these bundles are as follows:
Figure 2: Details of TOT bundles bid out8
TOT Bundle 1
• 9 stretches of length ~682 kms in the states of
Andhra Pradesh and Gujarat
• Authority assessed IECV of INR6258 crores
• Highest bidder bid at ~1.5 times the IECV. Financial closure of bundle
was achieved in August 2018
TOT Bundle 2
• 8 stretches of length ~586 kms in the states of Rajasthan, Gujarat,
Bihar and West Bengal
• Bids received were less than IECV and hence not awarded
TOT Bundle 3
• 9 stretches of length ~566 kms in the states of Uttar Pradesh, Bihar,
Jharkhand and Tamil Nadu
• Bid process is ongoing
3.3 Future of PPP in India

a. HAM to continue as a major on suitable risk allocation should NHAI is also exploring
PPP road development mode also be tried. securatisation of toll revenue,
which can be one of the most cost-
As evident, pure play PPP projects b. Asset monetisation modes
effective ways to raise capital. NHAI
like BOT (Toll and Annuity) have to gain significance
is exploring a similar instrument
dried up recently, paving the way
Asset monetisation models like with the State Bank of India, where
for innovative modes like HAM.
TOT have also gained prominence in it intends to monetise road projects
Reasons include
recent years. This trend is expected with high traffic density. In this
• Dearth of high traffic stretches to continue, with NHAI having arrangement, SBI will be providing a
which are being bid out by the identified approximately 6,400 km loan to NHAI against toll receivables
authority of roads to be bid out on TOT9. NHAI from a selected bouquet of
is also looking for mechanisms to projects11.
• Developers/investors being
fund TOT through Infrastructure
generally hesitant to participate
Debt Funds. In addition, NHAI is
in traditional PPP projects due to 8. Request for Proposal for TOT Bundle 1,
also exploring other monetisation National Highways Authority of India, 2017,
increased risk perception
techniques like Infrastructure Request for Proposal for TOT Bundle 2,
Legacy of projects languishing National Highways Authority of India, 2018,
• Investment Trust (InvIT) and
Request for Proposal for TOT Bundle 2,
post award. securitisation of toll revenue. National Highways Authority of India, 2019,
Road Projects under TOT Model, Press
So HAM is expected to continue NHAI is expecting to get cabinet Information Bureau, July 2019
as the major mode of PPP for road approval and float its Infrastructure 9. Road Projects under TOT Model, Press
development projects at least Investment Trust (InvIT) by the end Information Bureau, July 2019
for the time being. Innovative of this year10. This is expected to be 10. NHAI plans to raise 75,000 crore from market,
implementation models with focus says chairman, Livemint, July 2019
an important instrument for funding
11. NHAI, SBI in talks to monetize highways,
of Bharatmala Pariyojana.
Economic Times, July 2019
23
04
Roads and
highways
sector issues
4.1 Overview of issues in the sector

The roads and highways sector has its own set of issues This can be classified as follows:
Figure 1: Overview of issues in roads and highways sector over project life cycle1
Project
Construction stage O&M stage
development stage
• Higher land acquisition • Limited funding option • Debt servicing and

cost • Fading interest of PPP investment returns for
• Project implementation developers private developers
Financing mode choice • Lender’s averseness • O&M expense
issues • Increased project cost
• Sub-optimal alignment • Delayed approvals and • O&M requirements

leading to higher cost clearances due to adverse weather
• Land acquisition delays • Local/ enforcement issues conditions
• Cost overrun due to delay • Toll collection pilferage
Operational • Construction material • Safety issues
issues shortage • Road user facility deficit
• State Support Agreement • Disputes and claims due • Disputes and claims due
• Other pre-project related to delayed construction to O&M issues and lesser
delays • Cost overrun than projected revenue
generation
Other issues

secondary research
27
These issues have been discussed in the following section:
4.2 Financing issues

Following is a brief description of various financing issues observed throughout the
project development life-cycle:
a. Project-development stage b. Construction stage c. O&M stage
Land acquisition cost has There is a lower appetite for There is uncertainty on equity
increased more than 30 per private developers to absorb returns in existing operational
cent since 20172 primarily due to construction risk as well as traffic PPP projects along with
enhanced compensation payment risk based on legacies – e.g. difficulties faced in servicing
requirements as per languishing projects and projects debt. This is due to uncertainty
’The Right to Fair Compensation needing premium payment of toll revenue collection and
and Transparency in Land deferment. variation of collected toll revenue
Acquisition, Rehabilitation and Road sector projects are compared to projected levels.
Resettlement Act’. increasingly facing financial This discourages private sector
interest. The increase in O&M
-
In addition to this, current project closure issues. Reasons include

wariness of banks to lend, high costs are also affecting the
implementation modes like
share of NPAs, asset liability project returns.
EPC and HAM put high stress
on government resources, thus mismatch and banks reaching
limiting the number of projects infrastructure lending caps.
that can be taken up at one go.
4.3 Operational issues

Following is a brief description of various financing issues observed throughout the
project development life cycle:
Delays in pre-construction Road development process Often unforeseen weather

activities (such as land requires a number of approvals conditions require unplanned
acquisition, relocation) is such as environmental clearance, O&M, over and above
affecting project timelines. These forest clearance, railways the routine and periodic
processes consume considerable clearance, etc. Each of these maintenance activities. This
time. Land acquisition for road activities take considerable time results in enhanced O&M
projects involve various stages. and non-adherence to timelines expenses. In addition to this,
Each stage involves a number result in cost overruns due to there is a general lack of road
of stakeholders and regulatory delays. In addition, other factors user facilities. Safety related
bodies. The completion depends like enforcement issues and issues are also observed on
on other factors like geographical lack of construction material many road stretches such as
location and hence, the process also result in delays. Managing high accident response times,
is challenging. Inadequate problems of sub-contractors etc.
technical due diligence at and holding them accountable
the time of preparation of is also a major issue faced. Sub-
Detailed Project Report (DPR) contractors also face payment
can also lead to high project issues.
costs due to aspects like sub-
optimal alignments leading to
enhancement in construction
cost.
2. NHAI ordering to slow down, land costs to remain stable till 2020, Financial Express, January 2019
4.4 Other issues

Following is a brief description of various project related issues observed in the roads
and highways sector:
All state government authorised Claims arising out of disputes The returns on projects is not
projects are not backed by a between the concessionaire/ upto expectations because of
state support agreement, which contractor and the government improper DPR and traffic reports
results in low interest in such authorities is also a significant in the feasibility stage. Actual
projects. cost which can lead to large traffic is much less than the
liabilities. anticipated traffic, and so the
lower returns deeply affects
the financials of the project.
Arbitration issues also result in
project delays, which cause cost
-
and time overruns.
29
05
Recent
policy
initiatives by
the government
The government has introduced a number of policy initiatives to ensure an enabling environment for
various stakeholders involved. The policy initiatives can broadly be categorised into the following:
Figure 1: Overview of policy initiatives in roads and highways sector1
Operational initiatives Revival of languishing projects
To enable process streamlining To revive, complete and make

Overview through policy interventions and Overview operational languishing projects.
enhanced automation.
Mode of delivery determination, 100 per cent equity divestment

Specific increased appraisal and approval Specific 2 years post COD, premium
Policies threshold, Bhoomirashi, Bidder Policies deferment, rationalised
Information Management System, compensation, one time fund
platform interlinking etc. infusion.
Amicable dispute resolution Other initiatives
To enable time bound resolution Augmenting funding sources,

Overview of disputes in an affordable Overview easing out operational issues,
manner. enhancing road safety and ETC.
Continuous evolution of PPP

Specific Dispute resolution through 3 tier Specific modes, changes in HAM
Policies stage, formation of SAROD. Policies regarding mobilisation advance
and construction grant, safety
related policies etc.

secondary research
33
5.1 Operational initiatives

Process streamlining is being Centre, to create Bhoomirashi, This system aims to simplify the
increasingly taken up by the a web portal which digitises the qualification process of bidders
ministry to ensure smooth appraisal cumbersome land acquisition for road construction contracts.
and approval of road sector process, and also helps in This helps in faster evaluation of
projects. Some of the major steps processing notifications relating technical information provided by
for process streamlining are: to land acquisition online. the bidders
Processing time, which was
a. Mode of delivery – MoRTH e. Interlinking between various
earlier two to three months has
is empowered by a Cabinet platforms - The two IT initiatives
come down to one to two weeks
Committee on Economic Affairs Bhoomirashi and BIMS, have
now3
(CCEA) decision to decide on now been integrated with the
mode of delivery of projects b. E-procurement system: NHAI Public Financial Management
is using the e-procurement System (PFMS). PFMS allows
b. Increased threshold for project
portal for tendering of all kinds for the compensation amount
appraisal and approval –
of goods and services. This has to be paid to the concerned
MoRTH was authorised through
led to greater transparency. The person directly, rather than
a CCEA decision to appraise and
system currently in use by NHAI being deposited with the CALA
approve projects up to INR1000
is the Central Public Procurement (Competent Authority for Land
crore2
Portal by National Informatics Acquisition).
In addition to this, many Centre (NIC)
Introduction of Goods and Services
technological initiatives have been
c. FASTag: A mobile application Tax (GST) created some initial
adopted by the ministry to aid the
has been launched for purchase issues such as change in material
execution and operation of a road
of tag and top up of FASTags. cost and addition of new tax.
project. Some major technological
FASTag has penetrated very But in long term it will lead to
initiatives are:
rapidly. In one year, it has decongestion, accelerated demand
a. Use of Bhoomirashi – The breached 1.5 million new users4 for logistics services and interstate
ministry has corroborated flow of goods5.
d. Bidder Information
with the National Informatics
Management System(BIMS)–
5.2 Revival of languishing projects

Projects which were languishing b. Premium deferment in the extent of delay provided. The
for a number of years have been stressed projects – The policy original operation period remains
attempted to be revived, with permits rescheduling of premium unchanged.
the help of a number of policy committed by concessionaires
d. One time fund infusion –
measures taken by the government. during bid stage for awarded
The policy enables revival
Some of the policy measures have projects.
and physical completion of
been discussed below:
c. Rationalised compensation languishing BOT projects that
a. 100 per cent equity divestment to concessionaires for have achieved at least
two years post COD – The languishing NH projects in 50 per cent physical progress,
policy enables private developers BOT mode for delays not through one time fund infusion
to take out their entire equity and attributable to concessionaires by NHAI, subject to adequate
exit all operational BOT projects -The policy enables extension due diligence on a case to case
two years from commercial of concession period for basis.
operation date (COD) languishing BOT (Toll) projects to
2. Policy Initiatives by Ministry of Road Transport & 4. Annual Report 2017-18, National Highways
Highways, Press Information Bureau, July 2018 Authority of India, accessed August 2019
3. Bhoomi Rashi Portal, Press Information Bureau, 5. GST is good and simple tax, Ministry of Road
January 2019 Transport and Highways, accessed August 2019
5.3 Amicable dispute resolution

Efforts have been made by NHAI This entailed a settlement of process, and for fast dispute
04
for dispute resolution through claims amounting to INR381 crore redressal7. The main objectives
the established mechanism of for an amount of approximately of SAROD were to reduce cost
Alternate Dispute Resolution INR30 crore in FY18. In 2017, NHAI due to the arbitration process and
through the three tier stage of: has also established Conciliation pendency of disputes, efficient
through Committee of Independent disposal of disputes and to develop
a. 3-CGMs committee
Experts (CCIE)6. experts for the arbitration process.
b. Independent Settlement 347 arbitrators have already been
Society for Affordable Redressal of
Advisory Committee (ISAC) and empanelled8.
Disputes (SAROD) was formed in
c. Executive Committee/Board of 2013 by NHAI to reduce cost and
NHAI for settlement of disputes time overruns due to the arbitration
5.4 Other initiatives

A number of other initiatives have been taken by the government to bring in efficiencies and safety into
the road sector. Some of such initiatives have been described below:
a. Continuous evolution of c. Safety related policies – • Through various applications,
PPP modes – After BOT (Toll) Ministry has also introduced users have been entitled
and BOT (Annuity) models a number of safety related to report road quality data,
failed to pique the interest of measures in recent years. accidents, potholes, etc. It
private investors post FY12, Some of the important also provides users with real
MoRTH came up with the measures are as follows: time data like waiting time, and
HAM model in 2016. HAM other key places of interest
• Ministry has proactively
tried to reduce the risks near toll plazas
identified black spots and is
borne by private players, by
working on its rectification. • An institution, Asian Institute
reducing the financing risk
As of 31 December 2018, of Transport Development,
of private investors (40 per
789 road accident black spots has been announced as an
cent of bid project cost paid
have been identified in various apex body for capacity building
by the Government during
states of which 651 are on in the area of road safety. Till
construction phase) and also
National Highways and 138 are October 2018, over 1,400
eliminating revenue risk.
on state roads9 professionals have been
The HAM mode was very
trained in road safety and road
successful and resulted in • Ministry has been trying
safety audit11.
many new developers also to strengthen the various
participating in the mode. institutes for driving, Policy initiatives by the
MoRTH also introduced the TOT in association with government have created a
mode in the roads and highways various stakeholders sustainable environment for
sector to attract institutional like corresponding the road sector development in
investors into the road sector. states, manufacturers, India. But another major factor –
etc. Government is also road sector financing, also has a
b. Developer friendly reforms for implementing a scheme huge impact on the road sector
HAM mode – HAM mode has for developing Institute of development. This is discussed in
been constantly updated over Drivers Training and Research the subsequent section.
the years to bring in developer (IDTR). 16 such institutes
friendly policies. Some of were functioning as on 31
such reforms are early release December 2018 10
of mobilisation advance and
construction grant
6. Annual Report 2017-18, National Highways 8. Annual Report 2017-18, National Highways 10. Year end Review: Ministry of Road Transport
Authority of India, accessed August 2019 Authority of India, accessed August 2019 and Highways, Press Information Bureau,
7. Annual Report 2017-18, National Highways 9. Year end Review: Ministry of Road Transport December 2018
Authority of India, accessed August 2019 and Highways, Press Information Bureau, 11. Year end Review: Ministry of Road Transport
December 2018 and Highways, Press Information Bureau,
December 2018
35
06
Road
Recent
sector
policy
fiinnitanci
iativnesg by
the
in Ingovernment
dia
6.1 Fund requirement

MoRTH is targeting completion funding requirement over five However, current sources of
of 60,000 km of NH in the next years is estimated at approximately funds are projected to meet
five years1 at an average road INR19 lakh crore which amounts to only approximately INR2.46 lakh
construction rate of 40 km per day. average annual fund requirement crore of the average annual fund
Assuming average construction of approximately INR3.8 lakh crore. requirement with an average
cost of approximately INR30 crore This analysis only considers fund deficit of approximately INR1.36
per km (including land acquisition requirements due to development lakh crore per annum only for
cost), and factoring in inflation of 60,000 km of NHs irrespective of road development part at the rate
for road construction cost at a mode of delivery. of 12,000 km per annum. This is
conservative 3 per cent, the total depicted in the following graph:
Figure 1: Projections for MoRTH – Funding available and required (INR lakh crore)2
Projections for MORTH: Funding available and required for building 60,000 km NH*
5.00
3.82 3.93 4.05
4.00 3.60 3.71
INR Lac Cr.
3.00 2.37 2.45 2.54 2.64

2.28
2.00 1.32 1.34 1.37 1.39 1.41
1.00
0.00
2019-20 (BE) 2020-21 (P) 2021-22 (P) 2022-23 (P) 2023-24 (P)
Total available funding Total funding required Deficit
While it is imperative for MoRTH funding gap in order to realise its key reasons for increasing gaps
to explore new avenues and infrastructure targets, it is also between available sources of
opportunities to bridge the important to explore and address funding and actual funding required.
6.2 Sources of fund

While the costs are rising, the and MoRTH with very limited assessment of the various financing
funding is getting ever more options to explore in order to heads to address the future fund
constrained leaving the government bridge the funding gap. The requirement is as follows:
Table 1: Assessment of sources of fund for MoRTH3
Financing head Assessment

Competing demand from other ministries - limited allocation to
1 GBS: Gross Budgetary Support
MoRTH
Limited increment as fund usage broad based to
2 CRIF: Central Road and Infrastructure Fund
include other sectors
3 PBFF: Permanent Bridge Fee Fund Limited quantum available on annual basis
4 Proceeds from TOT projects Set to increase with extensive use in coming years.
5 IEBR: Internal and Extra Budgetary Resources Can be increased with caution considering MoRTH’s future liability
6 Others: National Highway Fund (NHF), Overall contribution to funding is low (5-10 per cent)
National Investment Fund (NIF), Nibhaya Fund
1. BJP manifesto: 60,000 kilometres of highways 2. Achievements of four years, Ministry of Road 3. Achievements of four years, Ministry of Road
to be built in 5 years, Business Today, April Transport and Highways, Accessed July 2019, Transport and Highways, Accessed July 2019,
2019 KPMG in India’s analysis, 2019 based on KPMG in India’s analysis, 2019 based on
secondary research secondary research
39
As evident IEBR is the current used extensively in the coming b. Limited options within the
funding route which can be years. current prevailing ecosystem to
explored further, but with caution enhance funding
As evident, major funding and
keeping in mind future liabilities.
project related concerns can be c. Fading interest of highway sector
Apart from aforementioned
summarised as under: developers in PPPs.
sources, private investments in
the form of PPPs is another source a. Increasing cost of highway A broad framework to address key
of funding for road infrastructure sector projects leading to higher concerns are as follows:
projects. TOT is expected to be fund requirement
Figure 2: Framework for current funding challenges and related approaches4
1 2 3
Key challenges identified
Limited scope of Waning interest

Increasing costs + fund raising through
traditional routes
+ of private sector
in PPPs
Solution levers
Existing sources –
Optimise costs Policy reforms
increased funding
across phases + and new sources – + including new
PPP models
to explore
The approaches presented above Monetisation of road assets has monetise road projects with high
form the basis for bridging the been picking up in recent years. traffic density6.
funding requirement for the sector Some of the particular approaches
New implementation modes like
in the coming years to maintain the in asset monetisation are TOT,
least present value of revenue
pace of road development that was InvITs and securitisation of toll
which explores the concept of
observed in the past few years. revenue. TOT has been explored
variable concession period can
recently by NHAI. TOT is expected
Augmentation of current funding also be looked into. Introducing
to be used aggressively in the
sources and conceptualisation of such new implementation modes
coming years to unlock more value.
innovative ones is the current need can help reignite private sector
NHAI is also expected to come up
of the hour. Three possible ways interest. IEBR can be beefed
with its own InvIT by the end of this
to achieve this is by encouraging up with increasing use of tools
year5. Securitisation of toll revenue
monetisation of road assets, like value capture financing to
is also being explored by NHAI.
looking for new implementation enable recovery of a portion of
A similar instrument is already
models and augmenting IEBR with the appreciation in value of land/
being explored with the State
appropriate instruments. property by the government.
Bank of India, where it intends to
4. KPMG in India’s analysis, 2019 based on 5. NHAI plans to raise 75,000 crore from market, 6. NHAI, SBI in talks to monetise highways,
secondary research says chairman, Livemint, July 2019 Economic Times, July 2019
04
07
Global
perspective
in highways
sector
Global trends in infrastructure In some countries like Canada, of transport departments,

indicate increased focus on Singapore etc., focus is on creating increasing use of green principles
innovations, use of technology multimodal integration of the in road development, adoption
tools based on data and analytics various modes of transport to of e- mobility as a service,
to unlock operational efficiencies, ensure integrated development. implementation of integrated
shift of focus to developing While in other countries where road payment mechanisms for multi-
economies and mainstreaming of infrastructure development is still modal transport, increasing use of
sustainability. Roads and highways impending, issues like financing big data analytics, other technology
sector is not an exception. The of road assets are major areas of initiatives and flexible road pricing
role of roads and highways sector consideration. initiatives. Enhanced road user
in the overall transport sector facilities is a focus area globally.
Focus has also been observed
continues to be globally recognised.
on institutional integration
7.1 Information, Communication

and Technology (ICT) in roads
Technology is already beginning road transport sector, some of the security, passenger information
to play a pivotal role in easing the solutions lie in encouraging online system, digitisation of records etc.
problems prevailing in various processes for transactions, real
transportation sectors. For the time monitoring for safety and
ICT Solutions in Australia1
The Australian Government is that are designed to require no services are providing a viable
encouraging the development and human control alternative to car ownership for
deployment of new technologies some consumers. This could
• Connectivity: Next generation
and is working with states and accelerate long-term trends
of connected vehicles, which
territories towards a nationally away from car ownership, and
involve Cooperative Intelligent
consistent policy and regulatory impact on travel patterns and
Transport Systems (C-ITS),
environment. infrastructure use
will be able to communicate
Major focus areas are: with other vehicles (V2V), • Zero emission vehicles:
road-side infrastructure (V2I) Falling costs and new storage
• Automation: Most major
and other devices, such as options are likely to make
vehicle manufacturers, as well
mobile phones (V2P) for a wide electric-powered vehicles
as several large technology
range of safety and efficiency and other alternative fuel
companies, are developing
applications technologies (such as hydrogen
vehicles with higher levels of
fuel cells) more popular in the
automation, including vehicles • Sharing economy: Innovative
future.
car-sharing and ride-sharing

secondary research
43
7.2 Funding from multilaterals

Multilateral funding institutions related risks and improve the improves the investment credit
provide funding and/or guarantees financing health of projects. They quality, reduce risks and ensure
in countries like Brazil, Nepal offer a host of benefit to private project bankability.
etc. to encourage private sector investors such as access to use
investment, mitigate government of AAA rated instrument which
Sao Paolo State Sustainable Transport Project2
• Problem: Project was for Solution: Broadly the following Benefits: The benefits envisaged
rehabilitation of 650 kms of solutions were proposed: are as follows:
roads and reconstruction
• Partnership with the World • Insured against political risk
of 2 bridges. Total cost was
Bank’s agency to provide
estimated at $729 million. A loan • Better freight and passenger
guarantees
of $300 million was approved transport leading to logistical
by World Bank. But additional • Projects were bid out to efficiency
debt funding could not be commercial banks
• Long term increase in quality
procured, although assistance
• Guarantees were issued to a of life.
was provided by the state of Sao
bank on a $300 million loan.
Paolo
2. Brazil bridges infrastructure gap with

innovative funding solution, The World Bank,
November 2014
04
08
Recent
technol
policy ogical
advancements
initiatives by
the
in thegovernment
sector
8.1 Types of technological

advancements in the sector
A number of technological advancements have been observed in the roads and highways sector in
various modes of transport. Technological advancements can be bifurcated into the following modes:
a. Road infrastructure b. Public transportation c. Road safety

Technological advancements Technological interventions required Technological initiatives are
are required both at the for public transportation, efficient paramount for road safety initiatives
construction and operations improvement in fields of congestion like prevention of accidents,
stage. management, ticketing, data/ expediting response etc.
information availability etc.
A brief description of some of the issues posed and approaches are as follows:
Figure 1: Framework for technological approaches in the road sector1
Road infrastructure Public transportation Road safety
Construction stage – • Congestion management Need for enhanced

Absence of limited systematic road safety – prevention
• Ensuring efficient operational
monitoring and facilitation of of injuries, fatalities,
efficiency
project progress, bottleneck expedite response to
• Efficiency in issuance and delivery of incidents
identification, foreseeing
tickets
operation stage requirements
• Ensuring availability of data/
Operation stage - Issues information for enabling seamless
related to systematic travel
monitoring and facilitation of
• Ensuring passenger safety and
road operations, electronic toll
security
collections, O&M requirements,
road asset management, • Enabling multi-modal integration
bridge/structure assets through integrated tickets, others
management system
Technology initiatives Technology initiatives Technology initiatives

Road Infrastructure monitoring Intelligent Traffic
and evaluation Transportation management and Road safety solution
System (ITS) surveillance
Automated
Fare Collection Electronic Toll 1. KPMG in India’s analysis, 2019 based on
Solution (AFCS) Collection (ETC) secondary research
47
8.2 Technological initiatives in road

infrastructure
Technology based initiatives in passenger and freight transport. Management Information System
the road sector are increasingly Road safety is another important which has been developed by NHAI
being adopted – right from the area of application. and is currently used to monitor
initial stage of project preparation more than 3,000 projects2.
Many such technologies have
to construction and O&M phases
been adopted, such as the Project
and in enhancing service levels for
8.3 Technological initiatives in

public transportation
Significant technology interventions that are being adopted for the road transport sector are as follows:
Intelligent Traffic management Automated fare Electronic toll Road infrastructure

transport system and surveillance collection system collection system monitoring
solutions enable system aims to offers an integrated aims at eliminating approaches – these
interaction between reduce traffic system for managing the delay on toll approaches include
passengers, buses, congestion and tickets issued to the roads by collecting infrastructure
bus stops and provide various commuters of public tolls electronically monitoring and
command centres to options to the vehicle transport networks through RFIDs. This addresses specific
communicate much driver to reach their like buses, metros, uniquely identifies issues during
needed information destination. Key railways, etc. It each vehicle and construction and
such as bus location, components include helps generating thus helps make the operations phase
bus ETA at a certain video surveillance financial and other toll collection system of the road asset
bus-stop, bus system, traffic useful information efficient creation. Major
schedule monitoring, management system for monitoring components
etc. They also and alert system the performance may include 5D
check for possible and improving the Building Information
violations decision-making Modelling (BIM),
drones survey and
business analytics
system.
Electronic Toll Collection (ETC) has already been implemented throughout India. NHAI is also working to
convert all lanes into ETC enabled lanes.
8.4 T echnological initiatives in road safety

Road safety approaches are citizen control centre, provide real time road quality details and real time
centric and aim to provide road information about accidents and information on waiting time.
quality-related information or to routes to avoid and minimise
report any accident or pothole on accident response times. 2. Annual Report 2017-18, National Highways
the roads. They provide information NHAI has already launched the
on diversion in traffic, bottlenecks SukhadYatra app, which helps in

and safety through command reporting of accidents, as well as
04
09
IRecent
nvestment/
policnyess
busi
initiatibvies
possi litiebys
the government
9.1 Stakeholders involved in

roads and highways sector
A number of stakeholders are involved in the road development and operation life cycle. Brief is as below:
Figure 1: Brief of stakeholders involved in the roads and highways sector1
State governments MoRTH Appraisal/Approval

• Land acquisition Policy and regulatory PPPAC/SFC/EFC/CCEA
level framework
• Approval and clearance
• Utility shifting Implementing agency
• Enforcement Financial Stakeholders
(NHAI/State PWDs etc.)
• Banks
• FIs
Consultants • Investors /PEs
Concessionaire/contractor
• Technical • Lead arrangers
• Financial • Sovereign funds
• Legal • Merchant bankers
• Const. supervision
Suppliers material/equipment
• Regulators
• Technology expert
• Strategy expert
O&M contractors/toll
• Safety Consultant operators
Highway users
9.2 Opportunities for contractors,

developers, and operators
The various opportunities for contractors, developers and operators in the present environment are as
follows:
• The opportunities for developers • The opportunities for contractors typically for a duration of four to
are in the form of PPP projects, are in the form of constructing nine years. Additionally, generally
i.e. predominantly HAM projects the project via EPC mode or TOT projects are bid by investors.
coming up in recent years. With rehabilitation of roads. EPC These investors typically hire
60 per cent of the projects being projects have a number of OMT contractors for operations
floated on HAM mode, a number developers, throughout high, of the road assets. This is
of mid-range developers have medium and low turnover expected to pick up significantly
also joined the PPP bandwagon. categories in the coming years.
BOT (Toll) projects are also
• The opportunities for operators
expected to come up with the
are in the form of short-term 1. KPMG in India’s analysis, 2019 based on
government keen on offering secondary research
OMT contracts floated by the
10-20 per cent of NH projects in 2. Govt to offer 10-20% of national highway
government. These contracts are
FY20 on BOT basis2 projects on BOT basis for bidding,
Business Standard, July 2019
51
9.3 Opportunities for investors/

lenders
Banks have been the traditional debt providers for road projects. But a new kind of investors have come
up. These are the institutional investors who invest in long-term operation assets. They invest in two
kinds of assets:
• TOT bundles being floated by the • Buying of portfolio of operational

government which gives them the road assets from Indian developers.
right to collect toll on road assets This is in the form of road assets
for a long-term concession period, which have already been developed
while operating and managing and are operational.
the project. This is in return for an
upfront fee paid to the government.
Additional investment opportunity
in the future can be in the form of
monetisation of high traffic SHs
and MDRs authorised by state
governments
In addition to this, various have already come up in the roads can spur the future InvIT market in
upcoming opportunities are and highways sector. NHAI’s InvIT India. Securatisation of toll revenue
expected to come up in the near is also expected to come up by may also attract investment once it
future. These may be in the form the end of the year, to fund the starts gaining popularity.
of InvITs and securitisation of toll Bharatmala Pariyojana. Such kind
revenues. Private placed InvITs of acceptance by a central authority
9.4 Opportunities for consultants

There are a number of opportunities for consultants in the current scenario. This has been
highlighted below:
• Project related opportunities are • Advisory in road safety including • Freight transport like demand
in the form of feasibility study and road safety approach design estimation, strategy formulation
project management unit (PMU) and implementation, technical and operational improvement
for roads studies, road safety audit including
• Advisory to state governments
identification and addressal
• Advisory in policy matters for projects funded by
of blackspots and organising
including regulatory, financial and multilaterals in areas of Project
workshops
legal aspects Management Consultancy (PMC),
• Passenger transport like transport capacity building, feasibility of
• Advisory and implementation
planning, business strategy specific projects like expressways,
support in technology including
formulation and operation road safety and IT application
technology solution ideation,
improvement development and implementation.
development, deployment and
operation
1004
Road map
Recent
for
polithe
cy roads
and
initiahitivges
hways
by
the
sectorgovernment
10.1 Way forward

Highways development in the use of technology applications the next five to six years shall also
country for bridging the required will be a key requirement here. be an important consideration.
infrastructure gap is likely to be Promoting sustainability will be
The above road development cycle
over in the next five to six years and another significant focus area with
is likely to be broadly observed
development/construction activities increased reliance on e-mobility,
across different states in terms of
could reduce progressively. A use of bio fuels and eco-friendly
SHs and other roads also, though in
paradigm shift is expected from development/construction. Further,
a staggered manner.
highway construction/ development augmenting existing sources of
to provision of quality service to finance in order to complete the Based on the current sector trends,
highway users, both for freight and required highway construction in following are the priorities of
passenger transport. Enhanced the sector which are likely to be
addressed in the immediate future:
a. Shift from construction to O&M and capacity augmentation work
As mentioned above, a shift can State governments also need In addition to this, capacity
be observed from construction to to embrace the TOT mode to augmentation work may also be
O&M and capacity augmentation monetise operational high traffic observed in the upcoming years
work. The monetisation of state highways and major district due to many high traffic road
existing roads offer the following roads, to create an additional stretches breaching capacity.
benefits: funding source which can be This is expected to be an
used in development of new additional source of business for
• Efficient O&M of the roads
roads. contractors in coming years.
• Augmentation of existing fund
for the authority.
b. Focus on efficiency of freight and passenger transport
Bharatmala Pariyojana was 35 MMLP locations have been In addition to this, a number of
planned for efficiency of freight identified under Bharatmala IT enabled solutions are also
and passenger transport, and this Pariyojana. Availability of land being used to ensure ease
focus is expected to continue. has been confirmed for seven and efficiency of freight and
locations1. Development of such passenger transport. These are in
MMLPs have been at the heart
MMLPs is expected to pick up the form of e-ticketing, discovery
of this development. Multimodal
in the coming years as ease and of flexi-routes by e-tracking,
Logistics Parks are aggregation
efficiency of travel gathers more multimodal online smart tickets,
and disaggregation centres for
significance. use of security devices, etc.
freight. Their primary objective
is to ensure smooth migration to Intermodal stations for passenger Convergence with other transport
faster transport modes such as transport are being considered ministries is also essential to
rail, coastal shipping, etc. This at select urban locations in order ensure an integrated and holistic
helps in decongestion of roads. to facilitate enhanced services to approach leading to multi-modal
passenger transport. integration.

55
c. Increased priority on road safety
Road safety is expected to garner continue garnering significant country, and witness more
more focus in the future. Some of attention enrollments
the priority areas include:
• System of IT based alerts: IT • Safety features in vehicles:
• Addressing of black spots: based alerts about accidents, More safety features in
The government is taking many bad quality of roads and vehicles are likely to be
active steps in this direction. potholes is expected to gain adopted, such as adaptive
This is expected to continue further acceptance cruise control, automatic
going forward emergency braking, blind
• Driver and staff training:
spot detection and safety exit
• Reduced response time to Driver and staff training
assist.
accidents: Response time to institutes are expected to
accidents is a factor leading come up throughout the
to fatalities. This is likely to
d. Adoption of more IT enabled solutions
A number of IT applications have of improving performance and integrated border

been adopted in recent years, during construction, project management system
and this trend is expected to management and use of
• Technology initiatives in
continue. unmanned aerial vehicles
road safety are also expected
• Road infrastructure • New technological initiatives to be adopted in a big way.
monitoring and evaluation in public transport are also Some of the likely solutions
is expected to be aided by expected to be observed. include intersection collision
technology solutions, and use Some of such initiatives can avoidance systems, dynamic
of such solutions is expected be in the form of a logistics curve warning systems and
to be more widespread. Such marketplace or an automated automatic crash detection.
solutions can be in the form
e. Exploring innovative financing mechanisms
To address the funding gap which of future liabilities. The likely • Policy reforms including
is being observed in the sector, options to raise capital are new PPP modes: A number
the approach levers that have bonds, masala bonds and of policy decisions have been
been identified earlier need to be debts from Multilateral Funding taken by the ministry lately.
built upon. Institutions (MFI)s. Other This needs to continue into the
funding mechanisms like Value future. Other measures that
These approach levers are:
Capture Financing (VCF) can can be explored are reduction
• Bettering funding also be explored. In addition to of tax on infrastructure bonds
from existing sources this, monetisation techniques and extension of tax holiday
and leveraging other like InvITs and securitisation to infrastructure developers.
mechanisms: As discussed, of toll revenues can also be Some innovative PPP modes
funding sources are limited. explored. Funding from TOT similar to Least Present
Ministry has to tap into internal needs to be tapped into with Value of Revenue can also be
extra budgetary resources aggressive bidding out of explored.
as much as possible, subject project bundles in the future
to keeping tab on the extent
f. Adoption of sustainable transport approaches
Adoption of sustainable transport storage solutions, smart grids, Pradesh, Maharashtra, etc. have
approaches can also be adopted etc. they also promote the come out with EV policies. This is
in a widespread manner in adoption of electric vehicles expected to be adopted by more
the future. This is because by the people through states
environmental issues are fast incentives proposed therein
• Use of biofuels has been
gaining significance. Some of the like subsidy on purchase of
encouraged, with the ministry
ways to help ensure sustainable an electric vehicle, purchase
issuing a notification regarding
development are: and installation of charging
the blending of gasoline with
station, etc. Such incentives
• Adoption of EV has been methanol in order to reduce
are expected to be continued
encouraged in the latest vehicle exhaust emissions.
in the future
budget. While these policies Such measures are expected
promote investment in battery A number of states like to continue in the future.
charging infrastructure, energy Karnataka, Gujarat, Andhra

57
About KPMG in India

KPMG in India, a professional offices across India in Ahmedabad, provide rapid, performance-based,
services firm, is the Indian Bengaluru, Chandigarh, Chennai, industry-focussed and technology-
member firm affiliated with KPMG Gurugram, Hyderabad, Jaipur, enabled services, which reflect a
International and was established in Kochi, Kolkata, Mumbai, Noida, shared knowledge of global and
September 1993. Our professionals Pune, Vadodara and Vijayawada. local industries and our experience
leverage the global network of of the Indian business environment.
KPMG in India offers services to
firms, providing detailed knowledge
national and international clients in
of local laws, regulations, markets
India across sectors. We strive to
and competition. KPMG has
About CII
The Confederation of Indian competitiveness and business engine for achieving this target.
Industry (CII) works to create and opportunities for industry through With the theme for 2019-20 as
sustain an environment conducive a range of specialised services and ‘Competitiveness of India Inc -
to the development of India, strategic global linkages. It also India@75: Forging Ahead’, CII will
partnering industry, Government, provides a platform for consensus- focus on five priority areas which
and civil society, through advisory building and networking on key would enable the country to stay
and consultative processes. issues. on a solid growth track. These are
- employment generation, rural-
CII is a non-government, not- Extending its agenda beyond
urban connect, energy security,
for-profit, industry-led and business, CII assists industry to
environmental sustainability and
industry-managed organisation, identify and execute corporate
governance.
playing a proactive role in India’s citizenship programmes.
development process. Founded Partnerships with civil society With 66 offices, including 9 Centres
in 1895, India’s premier business organisations carry forward of Excellence, in India, and 10
association has around 9000 corporate initiatives for integrated overseas offices in Australia, China,
members, from the private as and inclusive development Egypt, France, Germany, Singapore,
well as public sectors, including across diverse domains including South Africa, UAE, UK, and USA,
SMEs and MNCs, and an indirect affirmative action, healthcare, as well as institutional partnerships
membership of over 300,000 education, livelihood, diversity with 355 counterpart organsations
enterprises from around 276 management, skill development, in 126 countries, CII serves as a
national and regional sectoral empowerment of women, and reference point for Indian industry
industry bodies. water, to name a few. and the international business
community.
CII charts change by working India is now set to become a US$
closely with Government on policy 5 trillion economy in the next
issues, interfacing with thought five years and Indian industry
leaders, and enhancing efficiency, will remain the principal growth
About CII
List of Abbreviations
NH: National Highway
NHDP: National Highways Development Project
Special Accelerated Road Development Programme for Development of Road Network in the
SARDP-NE:
North Eastern States
MoRTH: Ministry of Road Transport and Highways
NHAI: National Highways Authority of India
NHIDCL: National Highways Infrastructure Development Corporation Ltd
PWD: Public Works Department
BRO: Border Roads Organisation
SH: State Highway
MDR: Major District Road
PMGSY: Pradhan Mantri Gram Sadak Yojana
ULB: Urban Local Body
EPC: Engineering-Procurement-Construction
MMLP: Multi Modal Logistics Park
IT: Information Technology
TOT: Toll-Operate-Transfer
InVIT: Infrastructure Investment Trust
EV: Electric Vehicle
PPP: Public Private Partnership
BOT: Build-Operate-Transfer
HAM: Hybrid Annuity Mode
OMT: Operate Maintain Transfer
VGF: Viability Gap Funding
O&M: Operation and Maintenance
MCA: Model Concession Agreement

BKC: B K Chaturvedi
RFQ: Request for Qualification
ODR: Other District Road
PMC: Project Management Consultancy
ROB: Road Over Bridge
RUB: Road Under Bridge
GDP: Gross Domestic Product
BIMS: Bidder Information Management System
61
List of Abbreviations
RFP: Request for Proposal
FY: Financial Year
HNI: High Net Worth Individuals
PE: Private Equity
IDF: Infrastructure Debt Fund
DPR: Detailed Project Report
CCEA: Cabinet Committee on Economic Affairs
TPC: Total Project Cost
COD: Commercial Operation Date
NIC: National Informatics Centre
BIMS: Bidder Information Management System
PFMS: Public Financial Management System
ISAC: Independent Settlement Advisory Committee
CCIE: Conciliation through Committee of Independent Experts
SAROD: Society for Affordable Redressal of Disputes
IDTR: Institute of Drivers Training and Research
GBS: Gross Budgetary Support
CRIF: Central Road and Infrastructure Fund
PBFF: Permanent Bridge Fee Fund
IEBR: Internal and Extra Budgetary Resources
NHF: National Highway Fund
NIF: National Investment Fund
PMU: Project Management Unit
AI: Artificial Intelligence
ISA: Intelligent Speed Adaptation
MFI: Multilateral Funding Institutions
VCF: Value Capture Financing
GST: Goods and Services Tax
ICT: Information, Communication and Technology
ITS: Intelligent Transport System
AFCS: Automated Fare Collection System
BIM: Building Information Modelling
ETC: Electronic Toll Collection
Acknowledgements
1. The work done on this publication are based on extensive research done by the KPMG team.
The KPMG team of experts who prepared this Knowledge Paper include:
• Davinder Sandhu
• Sameer Bhatnagar
• Abhishek Mukherjee
• Gaurav Vaish
• Abhisek Das
2. Special mention to the team from CII namely Parvesh Minocha and Dr. Rajesh Kapoor
for providing important insights.
3. Brand and Compliance team
• Anupriya Rajput
• Sharon D’silva
IN OUR ABILITY TO TRIUMPH OVER
ANYTHING IN OUR SPIRIT OF
UNDYING ENTHUSIASM OUR DRIVE
TO ACHIEVE THE EXTRAORDINARY
UNMOVED BY FEAR OR CONSTRAINT
WE’RE DRIVEN BY JOSH AND IT
SHOWS
© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. THIS ADVERTISEMENT FEATURES KPMG INDIA EMPLOYEES
KPMG in India’s contacts: CII contact:
Nilaya Varma Rajesh Kapoor
Partner and Leader, Director and Head - Haryana
Markets Enablement Confederation of Indian Industry
T: +91 124 669 1000 E: rajesh.kapoor@cii.in
E: nilaya@kpmg.com
Davinder Sandhu
Partner and Head,
Transport Sector
T: +91 124 669 1000
E: davindersandhu@kpmg.com
Abhishek Mukherjee
Technical Director,
T: +91 124 669 1000
E: abhishekmukherjee@kpmg.com
Sameer Bhatnagar
Partner,
T: +91 124 669 1000
E: sameerbhatnagar@kpmg.com
home.kpmg/in
Follow us on:
home.kpmg/in/socialmedia
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we
endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the
particular situation.
© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
This document is meant for e-communication only. (025_THL0919_AR)

India Technology Issues Trends Roads Highways PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

India Technology Issues Trends Roads Highways PDF

Uploaded by

Copyright:

Available Formats

Roads and

KPMG in India Foreword

01. Executive Summary

2.1 Sector background

Highways in the next five years7. Figure 2.

2.2 Sector trends

Table 1: Salient features of the Bharatmala Pariyojana11

Upto October 2018, 6,407 km of an estimated cost of INR12,000 Expressway, Bangalore-Chennai

2.3 Current priorities for the sector

Figure 3: Current priorities in the road sector20

Key sector trends

20. KPMG in India’s analysis, 2019 based on secondary research

3.1 Risk Perception in highway projects

Figure 1: Various risks in a

Financing risk Revenue risk

Project development Construction phase Operation phase

In the construction A project faces a The financials of a road Adequate operations

1. Annuity payments (biannually) for 15 years

Hybrid Annuity Project

Toll collection by O&M by

Table 1: Risk parameters for road PPP models5

Mode Financing risk Construction risk Traffic risk O&M risk

Reducing risk for BOT (Toll) Concessionaire Concessionaire Concessionaire Concessionaire

5. KPMG in India’s analysis, 2019 based on

3.2 Evolution of PPP in road sector in India

A brief description of the phases is 3,000 2,677

Figure 2: Details of TOT bundles bid out8

3.3 Future of PPP in India

4.1 Overview of issues in the sector

• Higher land acquisition • Limited funding option • Debt servicing and

• Sub-optimal alignment • Delayed approvals and • O&M requirements

1. KPMG in India’s analysis, 2019 based on

These issues have been discussed in the following section:

4.2 Financing issues

a. Project-development stage b. Construction stage c. O&M stage

In addition to this, current project closure issues. Reasons include

4.3 Operational issues

a. Project-development stage b. Construction stage c. O&M stage

Delays in pre-construction Road development process Often unforeseen weather

4.4 Other issues

a. Project-development stage b. Construction stage c. O&M stage

and time overruns.

Figure 1: Overview of policy initiatives in roads and highways sector1

Operational initiatives Revival of languishing projects

To enable process streamlining To revive, complete and make

Mode of delivery determination, 100 per cent equity divestment

Amicable dispute resolution Other initiatives

To enable time bound resolution Augmenting funding sources,

Continuous evolution of PPP

1. KPMG in India’s analysis, 2019 based on

5.1 Operational initiatives

5.2 Revival of languishing projects

5.3 Amicable dispute resolution

5.4 Other initiatives

6.1 Fund requirement

3.00 2.37 2.45 2.54 2.64

Total available funding Total funding required Deficit

6.2 Sources of fund

Table 1: Assessment of sources of fund for MoRTH3

Financing head Assessment

Figure 2: Framework for current funding challenges and related approaches4

Limited scope of Waning interest

Global trends in infrastructure In some countries like Canada, of transport departments,