TrafficInfraTech Magazine Linking People Places & Progress
Roads
Roads have become an integral part of Indian transport system, it carries almost 86% of the passenger traffic and 63% of the total freight traffic. Publicprivate partnerships (PPPs) have played a vital role in spurring the development of road sector in India. The Government encouraged Public Private Partnership to bridge the gap between demand and supply. Government’s impetus along with significant public-private participation has made rapid progress in the implementation of the National Highway Development Project (NHDP). There has been efficiency gains and greater clarity in regulatory and policy environment across all infrastructure sectors.
Policy makers in India have assessed the merits of PPPs for delivering infrastructure services and successfully awarded more than 750 projects in the past one and a half decade. In the case of road sector, its a well-known fact, in the past few years, the vehicular growth has substantially increased corresponding to growth of road network in India, which created a wide and growing gap between demand and supply of road infrastructure.
An extensive expansion of road network was needed to fill this gap, which would have been inevitable without PPP in this sector. The model concession agreement along with RFQ and RFP documents helped in clarifying the PPP policy and provided an integrated institutional policy framework for project development and implementation. By and large PPP road projects have given positive benefits to the economy; the experience of Asset maintenance of a PPP road project in NHDP has been encouraging. Earlier, road maintenance was viewed simply as unimportant; especially being a nonplan activity and there was a tendency by government to apply adhoc cuts in the face of resource constraints. In today’s date, the impact of maintenance is significant considering the rates of return of road infrastructure investment.
Maintenance of the developed highways is as important activity as building of new ones. Various state governments have also adopted PPP approach, this has helped them to solve the road capacity problems by maintaining an optimum balance between accommodating growing traffic demand and safeguard the cities and towns as livable. Finally, the emphasis should be for the selection of right PPP model for the right projects, which in turn could improve the infrastructure standards in the country and thereby improve the overall macroeconomic scenario.
Building Highways to Growth
The National Highways Authority of India has invited bids for a length of 10,460 km, costing nearly Rs.1750 billion till January, 2018, the average length of road projects awarded by NHAI in the last 5 years was 2,860km, with 4,335 km awarded in 2016-17. NHAI is also ramping up the pace of construction. In 2017-18, NHAI is set to complete construction in a length of 3,500km. against the average in last 5 years of 2,170km. To maintain the pace of construction, NHAI has commenced works on 27 new projects covering 1,330km and will commence the work soon on another 50 projects covering 3,000km.
National Highways Investment Promotion Cell
The National Highways Authority of India has created a National Highways Investment Promotion Cell (NHIPC) for attracting domestic and foreign investment for highways projects. The cell will focus on engaging with global institution investors, construction companies, developers and fund managers for building investor participation in road infrastructure projects.
The primary focus of NHIPC will be to promote foreign and domestic investment in road infrastructure. The Government has set an ambitious target of construction of 35,000 km. of National Highways in the next five years under ‘Bharatmala Pariyojana’. This is a new umbrella program for the highways sector that focuses on optimizing efficiency of freight and passenger movement across the country by bridging critical infrastructure gaps through effective interventions like development of Economic Corridors, Inter Corridors and Feeder Routes, National Corridor Efficiency Improvement, Border and International connectivity roads, Coastal and Port connectivity roads and Greenfield expressways. The objective is to add 35,000km of new highways with an outlay of about $ 82 billion over the next five years—to raise investments in infrastructure, and boost economic growth. The government expects private participation through public private partnership of about $16 billion.
Toll Operate Transfer
Toll Operate Transfer (TOT) is a new model adopted by NHAI of India to monitize public funded National Highway ( NH) projects which are operational and generating toll revenues for at least two years after the Commercial Operation Date. This Model would provide an efficient Operation and Maintenance (O&M) framework requiring reduced involvement of NHAI in projects post construction completion. TOT would also facilitate efficient toll realization through private sector. The right of collection of user fee (toll) will be assigned for a specific time period, to developers/ investors against upfront payment of a lump-sum amount to the Government and the O&M responsibility would remain with the developer.
Around 75 operational NH projects, of 4500 km completed under public funding have been preliminarily identified for potential monetization using the TOT Model. This model could be ideal for international institutional investor who have long term investment appetite and for bidders who have access to low cost debt.
Hybrid Annuity Model
Hybrid Annuity Model is a mix of Engineering, Procurement and Construction and Build, Operate,Transfer Model. In this model,the government will contribute around 40% of the project cost to the developer and the remaining 60% to be borne by the private player.