Infrastructure: Rush Hour [Pg. 2]

[Contn.]
Rush Hour

The wallet's taken care of

Return On Roads

The government has worked out some innovative schemes to ensure private companies don't get short-changed and work goes on.
The BoT Toll-Based Scheme: The toll works out to Rs 0.40 a km for cars, Rs 0.70 a km for light commercial vehicles and Rs 1.40 a km for trucks and buses. The government has already tied up the BoT toll-based scheme for three major stretches, the Tada-Nellore stretch (120 km), the Tumkur-Neelamangala Kishangarh railway over bridge (32 km), and the Durg bypass. The value of the total projects cleared amounts to Rs 1,000 crore.
The BoT Annuity Scheme: For companies unwilling to burn their fingers through the toll system, the government has worked out an annuity-based scheme. While the private operator builds and operates the road, the toll is collected by the government. And the government pays them a regular amount for the next 15 years. The government has already cleared five stretches (projects valued at Rs 1,550 crore) for the annuity scheme. These include the Rajamundry-Dharmavaram (54 km) stretch and the Dharmavaram-Tuni (46 km) one.
The NHAI SPV: The Ministry has also worked out a novel mechanism to leverage NHAI funds to set up special purpose vehicles (SPVs) for projects like the Moradabad bypass and the Ahmedabad-Vadodra Expressway. Under the scheme, the nhai puts in a certain amount of equity into the SPV with or without a partner and uses this equity to raise money from the market. The money is to be paid back from the future toll revenues.

There isn't a thread out of place in the government's financial closure strategy for this project. Out of the Rs 54,000 crore required over 8 years (1999 to 2007), Rs 20,000 crore will come from the Re 1 cess imposed on every litre of petrol or diesel sold in India post February 1998; an equal sum will come through soft loans from the World Bank and ADB; Rs 10,000 crore will come from bonds (exempt from capital gains tax) issued by nhai; and Rs 4,000 crore from private sector companies who participate in the scheme under the BoT arrangement.

Are these numbers achievable? Well an amount of Rs 16,846 crore (See graph Funding Arrangement NHDP Phase-I) has already been mobilised from the cess and from market borrowings; an additional Rs 7,862 crore has come in as loan from the World Bank and ADB; and private sector companies have already been awarded contracts worth Rs 2,860 crore of the Rs 4,000 crore they were expected to.

Will the private companies participating in the project get at least the market rate of return on their investments? To ensure that this happens the government has worked out three alternative schemes: the BoT-toll based scheme; the BoT-annuity based scheme; and the nhai special vehicle programme (See Return On Roads).

The impact on the economy

The project is a Keynesian dream come true. A feasibility study conducted by the National Highways Authority of India shows that the multiplier effect of such a massive investment could be huge.

The project will provide employment to 40 individuals per km per day (in other words, it will generate employment of 7.3 crore mandays a year). And it will require 99 lakh metric tonnes of cement and 8.6 lakh metric tonnes of steel.

The real benefit, however, lies in the speedier transportation of goods. Inter-metro freight accounts for 60-70 per cent of total road-freight in India.

The GG is expected to cut the time taken to move goods from one metro to another by between 50 per cent and 60 per cent. Says a senior official in the ministry of road transport and highways: ''Today, it takes between three to three-and-a-half days for a truck to go from Delhi to Kolkata; once the GG is done, it will take just one-and-a-half days.''

Then, there are benefits that will accrue in the form of lower vehicle operating costs, reduced fuel consumption, and less wastage (of perishables). According to a World Bank report, the completion of the GG would mean an annual saving of Rs 8,000 crore. Now, if they could only solve that minor bottleneck near Hapur.

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