1. With an extensive road network of 3.3 million km, India is the second largest in the world. 2.

Indian roads carry about 61% of the freight and 85% of the passenger traffic. 3. All the highways and expressways together constitute about 66,000 kilometers (only 2% of all roads), whereas they carry 40% of the road traffic. 4. Indian Government annually spends about Rs.18000 crores (USD 3.704 billion). 5. So far, 65 central sector projects in road and transport, ports and civil aviation have been completed with a total investment of Rs. 25343 cr. Another 83 projects in this category and railways with an estimated project cost of Rs 75914 crore are under implementation in the central sector. Also, 160 projects in these segments are in the pipeline with an estimated project cost of Rs 1,84, 807 crore. Source: RBI 6. Therefore, profitability or otherwise of toll based PPP projects depends on several variables such as institutional framework in place to govern PPPs, traffic density, percapita income, availability of supporting infrastructure, etc. These variables differ from state to state. 7. Starting from land acquisition to shifting of utilities to providing police protection at the project site, the support of the state government is very crucial for successful implementation of the PPP projects 8. The Ministry of Road Transport and Highways is already in the process of preparing a draft for creation of a National Expressways Authority of India (NEAI) on the lines of NHAI. The government can provide land for the project site, regulatory clearances, and a concession right to the contractor/concessionaire. The private sector, on the other hand, is expected to invest funds ------------------------------------------------------------------------------9. Private sector firms have a better structure of incentives and sanctions a. Potential for cost efficiency b. Optimisation of resources in the initial construction phase to prevent high maintenance costs later c. They possess greater flexibility of resources to manage them well d. Strong motivation: Profit e. FDI: Superior construction, technology, cheap financing, better management 10. Total number of PPPs (Expressways and Highways) : 282

a. Source: Dept of Economic Affairs, Ministry of Finance, Govt of India

11. Policy changes: a. 1956: National Highways Act: Right of construction, maintenance, operation and tolling of highways only to central government b. Amendment in 1995 to attract private investment (PPP came into being) i. Permission to a private entity to invest in projects, collect and retain toll c. Motor Vehicles Act 1988: Private entity allowed to regulate traffic on such highways 12. However, PPP wasnt very successful. Out of 7507.97 Kms in the Ist phase, only 1350 were upgraded to PPP contracts. a. No integrated policy or framework for proje ct specifications b. Inadequate availability of long-term finance : both debt and equity c. Insufficient capability of the public sector to prepare relevant standardised contracts d. Private sector not ready with technical and financial expertise in this segment 13. 2005: Things changed as the Government decided to give a great thrust to PPPs a. Decided that 2100 kms of NHDP-II & future projects will be undertaken on a BOT basis 14. Initiatives launched by Government to help the same a. Standardization of bidding and concession documents Integrated policy framework i. RFQ, RFP prepared 1. RFQ a. Short-listing done on basis of technical and financial capabilities

b. Previous experience and financial capability of bidder relevant 2. RFP a. Best value for money ii. Model Concession Agreement(MCA) 1. Prepared for a. BOT Toll b. BOT Annuity c. BOT Operation iii. Since 1 Jan 2007, all contracts awarded under MCA b. Financing Measures Earlier, debts were generally available for 7-8 years in Indian financial market. However, infra projects required longer payback period and hence, this mismatch resulted in inadequate availability of funds. Also, local pension and debt markets were underdeveloped. Hence, the government undertook these measures: i. IIFCL India Infra finance company ltd 1. Set up in 2006 2. Refinanced infra loans by banks and FIs 3. Also lent directly with a limit of 20% of project cost 4. PPPs are given overriding priority by IIFCL ii. VGF 1. Provision of capital grants for BOT Toll Projects 2. VGF could be upto 40% of project cost 3. Put in place in August 2005 iii. India Infra Project Development Fund (IIPDF) 1. Public Sector in India had poor skills to document creations and hence DPRs and PFRs were of sub-standard quality. Also, less ability to implement contracts 2. Set up with initial contribution of 100 crore 3. Supposed to help meet project development costs of public sponsoring of agencies of infra projects, both at central and state levels. 4. Can assist to meet upto 75% of project development cost 5. Costs recovered from successful bidder 6. Set up after announcement by FM in 2007-08 Budget Speech iv. PPP Appraisal Committee 1. Objective to reduce transaction cost, enhance coordination between ministries and fast track approval of PPP projects v. New PPP Policy(2007) bringing in significant changes like 1. Declaration of road sector as an industry to facilitate borrowing on easy terms and to permit floating of bonds 2. Longer concession periods (30 years) 3. Easier external commercial borrowing norms. 4. FDI including foreign equity participation up to 100 percent in the highways is allowed for BOT projects. Foreign investors generally allowed to repatriate 100 percent profits. 5. Provision of encumbrance free site for work, i.e. government bears expenses for land and pre-construction activities.

6. MRTP provisions have been relaxed to enable large firms to enter the highway sector. 7. Duty free import of modern high capacity construction equipments has been allowed. 8. Treating housing and other development activities which are integral part of highway project, as a part of infrastructure, for the purpose of tax concession. 9. 100 percent tax holiday for any 10 consecutive years out of 20 years after commissioning of the project. 10. Financial institutions providing long term finance for road projects have also been given an incentive by way of deduction of up to 40 percent of their taxable income derived from financing these investments. 15. Programme Upgradation of national highways a. Implemented in seven phases i. All phases except IV to be executed by NHAI ii. IV by Ministry of Roads, Shipping, Transport and Highways b. July 2009 TOTAL 405 road projects undertaken for upgradation c. Rate of growth dismal till 2005. Picked up after then. d. Policy interventions as mentioned earlier helped pick up growth after 2005 e. Also, growth in Indian Economy in 2006 led to a major spurt in PPPs 16. Growth of PPPs No of PPPs in highways(Toll +Annuity + SPVs)
40 35 30 25 20 15 10 5 0

Source: www.nhai.org and www.pppinindia.com as on 31, 2009.

17. Growth of PPPs

Some projects: 1. Jaiprakash Associates Ltd (JAL) a. Implementing the 165 kilometres long Taj Expressway project, which connects Greater Noida to Agra at a cost of US$ 554.93 million. 2. DS Construction a. Development of the Gwalior-Jhansi section on NH-75 that includes four-laning at a cost of US$ 159.9 million. 3. Maytas Infra Private Limited and Nagarjuna Construction Company Ltd (Joint Venture) a. Four-lane the highway from Tindivanam and Pondicherry, at an estimated cost of US$ 70.09 million. 4. Reliance Energy a. Three contracts to four-lane 400 kilometres of highway and four-laning of five national highway projects in Tamil Nadu that covers 400 kilometres and at an estimated cost of more than US$ 762.42 million. 5. State highway from Jaipur to Bhilwara\ a. 238 cr MOU between PWD and Jaipur Toll Road Pvt Ltd. b. 18 cr spent by state govt. For land acquisition and utility shifting processes c. 212 km road - 7 metres broad 1.5 metre hard shoulder and 1 metre earth shoulder -12 metre broad. d. 131 overbridges - project completion 18 months tolerance 22

REFERENCES 1. http://articles.timesofindia.indiatimes.com/2010-07-13/jaipur/28318746_1_highways-ppp-model-km 2.