Katara, Kunal

MATHUR, SHISHIR

English

San Jose State University

San Jose State University
SJSU ScholarWorks
Faculty Publications, Urban and Regional Planning Urban and Regional Planning
January 2010
Roads: Leading Indicators Show Ramp-Up in
Activity
SHISHIR MATHUR
San Jose State University, mathurshishir1@gmail.com
Kunal Katara
Follow this and additional works at: https://scholarworks.sjsu.edu/urban_plan_pub
Part of the Infrastructure Commons, Public Economics Commons, Public Policy Commons,
Real Estate Commons, Transportation Commons, Urban, Community and Regional Planning
Commons, Urban Studies Commons, and the Urban Studies and Planning Commons
This Presentation is brought to you for free and open access by the Urban and Regional Planning at SJSU ScholarWorks. It has been accepted for
inclusion in Faculty Publications, Urban and Regional Planning by an authorized administrator of SJSU ScholarWorks. For more information, please
contact scholarworks@sjsu.edu.
Recommended Citation
SHISHIR MATHUR and Kunal Katara. "Roads: Leading Indicators Show Ramp-Up in Activity" Faculty Publications, Urban and
Regional Planning (2010).
 © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. 
Policy Group Sector Update                         Page | 1 of 1 
 
 
Buoyed by the streamlining of the project award process and increased focus on the resolution of 
implementation-related problems, the highways sector is ramping up to meet the 2010-11 plan 
target.  Leading indicators show that 90% of this year’s project award target could be met at the 
current rate.  As larger projects come up for bidding, as is the case this year, developers could 
turn to financial investors to meet their equity requirements. 
 
 
Upsurge in activity after a long lull 
The upgradation of the national highways, which is primarily carried out under the National 
Highway Development Project (NHDP), is emerging out of challenging times.   
 
After a three-year slowdown, which was marked by the economic downturn in 2008-09, 
parliamentary elections and impediments to the bidding process, 2009-2010 witnessed an uptick 
in activity in the highways sector. Road length completed increased by approximately 25%. The 
project award activity increased more than 5-fold from 638 km to 3,360 km, although it fell well 
short of the target. Going forward, the project award activity is envisaged to grow more than 2.5 
times during 2010-11 to 9,000 km (see Figure 1).   
 
Figure 1:  Significant Increase in Concessions Awarded in 2009-10  
(Km) 
2351
754 636
1683 2203
2693 2500
1305
4740
1726
1234 638
3360
9000
0
2000
4000
6000
8000
10000
12000
14000
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11*
Road length complete
Contracts/Concessions awarded
 
*Projected targets per Ministry of Road Transport and Highways(MORTH) 
Source: MORTH, NHAI  
 
Leading indicators look promising 
Two leading indicators, project awards and land acquisition rate, show significant improvement.  
 
 Project awards have grown multi-fold: In November 2009, the B.K. Chaturvedi Committee 
(BKCC) proposed changes to the bidding documents and the Model Concession Agreement 
(MCA). Some of the key changes were relaxing the conflict of interest clause by increasing 
 
 
 
POLICY GROUP RESEARCH 
Roads  
Leading Indicators Show Ramp-up in Activity 
 
June 2010 
Dr. Shishir Mathur & Kunal Katara 
 
 © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. 
Policy Group Sector Update                         Page | 2 of 2 
the common shareholding limit among consortium partners, allowing developers an early 
exit after project completion, and allowing concessionaire capacity augmentation, instead of 
contract termination, should the actual traffic exceed the capacity for three consecutive 
years. These changes have contributed to a very significant increase in the project award 
activity. While only 8 projects totaling 643 km were awarded in the entire 2008-09, winning 
bids have been announced for 28 projects, totaling close to 2,200 km during the 5 months 
after the implementation of the BKCC (see Table 1).  
 
Winning bids for an additional 19 projects totaling close to 1,900 km have already been 
announced in the first two months of the current financial year!  
 
Table 1: Upsurge in Project Award Activity 
Project Description 
No of 
Projects 
Length 
(km) 
Project 
Cost (Cr.) 
FY 2008-09: Projects Awarded 8 643 8,591 
Pre- BKCC (April - Oct 2009): Projects awarded 10 944 9,606 
Post-BKCC  
(Nov 2009 - March 2010): Projects w/ winning bids 
28 2,177 21,830 
(April  - May 2010): Projects w/ winning bids 19 1,874 22,084 
Source: IDFC Analysis 
 
 Land acquisition rate has doubled: More than 3/4th of the completed NHAI projects were 
delayed, primarily due to land acquisition problems. Multiple steps are being taken to 
address the problems. The steps include appointment of senior officials by both the NHAI 
and the state governments to resolve the implementation problems, and creation of Special 
Land Acquisition Units (SLAUs), one for each highway project, to expedite land acquisition 
process. As a result, more than double the land (8,191 ha) was acquired in 2009-10 (till 
February, 2010) compared to the annual average (4,000 ha) of the previous three years.   
 
 Time reduction in the post-RFQ submission stage likely to be reduced even further as RFQ 
stage is to be done away in the future: Post-BKCC, it took projects 8 months from the RFQ 
submission date to the announcement of the winning bids, a little improvement over the 
pre-BKCC period when some projects languished in this stage for more than a year.  
However, the time needs to be further shortened. Going forward, acting on a BKCC 
recommendation, the government is likely to conduct an annual technical qualification 
assessment of the potential bidders, thereby obviating the need for a separate RFQ for each 
project. This step should shave off, at the minimum, 3-4 months from the pre-project award 
time.  
 
So where do we stand now? 
The National Highways Authority of India (NHAI), through the seven phases of NHDP, aims to 
upgrade 54,454 km of national highways (see Table 2).  The majority of projects under Phase I 
and II are complete or under implementation. Currently the bulk of the pre-construction activity 
is in Phase III and V with a sprinkling of Phase IV and Phase VII projects (5 in Phase IV and 1 in 
Phase VII) in the pre-award stage. We anticipate both these phases should pick up speed this 
financial year.  
 
As of March 2010, 25% of the highway development was complete, a little over 10% under 
implementation and over 60% yet to be awarded.  Clearly, the NHDP programme is well behind 
schedule, and Phases III to VII are likely to be delayed by several years. 
 
 
 © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. 
Policy Group Sector Update                         Page | 3 of 3 
Table 2: Progress of NHDP up to March 2010: Over 60% yet to be Awarded 
NHDP 
Phases 
Project Description 
Total Length 
(km) 
Length 
Compl-
ted(%) 
Length 
under 
Implementa
-tion(%) 
To be 
Awarded
(%) 
Likely Date of 
Completion 
NHDP-I Golden Quadrilateral 
(GQ),  North South- 
East West (NS-EW) 
Corridor, Port 
Connectivity & Others 
7,498 98% 2% 0.1% - 
NHDP-II 4/6-laning  NS-EW 
Corridor, Others 
6,647 67% 24% 9% 
Substantially 
by Dec - 2010 
NHDP-III  Upgradation, 4/6-
Laning 
12,109 13% 32% 55% Dec - 2013 
NHDP-IV 2-Laning with Paved 
Shoulders 
20,000 (5,000 
km approved 
under Phase-A) 
- - 100% Dec - 2015 
NHDP-V 6-Laning of GQ and 
High Density corridor 
6,500 3% 19% 78% Dec - 2014 
NHDP-VI Expressways 1,000 - - 100% Dec - 2015 
NHDP-VII Ring Roads, Bypasses 
and Flyovers and Other  
Structures 
700 - 6% 94% Dec - 2014 
Total  54,454 25% 13% 63% - 
Source: NHAI 
 
What do the leading indicators tell us? 
 
We are gearing up to meet the 2010-11 plan target but the momentum needs to increase 
For the year 2010-11 the government has set a target of building 2,500 km of roads and 
awarding projects totaling 9,000 km.  
 
The current pipeline of projects in RFQ, RFP, and winning bid stages (about 650 km/month - see 
Table 3) suggest that, at the current rate, approximately 8,000 km of work can be awarded per 
year, or 90% of the Ministry’s 2010-11 target of 9,000 km.  
 
Table 3: Project Pipeline: A Steady Flow on per Month Basis 
 Length (km) 
Cost 
(Cr.) 
Number 
of 
Projects 
Avg. 
Project 
Length 
(km) 
Avg. 
Project 
Cost 
(Cr.) 
km/per 
Month 
Projects in RFQ Stage 
(submission months: 
Jan-June 2010) 
3,686 30,390 35 105 868 614 
Projects in RFP Stage 
(submission months: 
Feb-June 2010) 
3,335 18,616 33 108 564 667 
Project w/winning bids 4,052 43,914 47 86 934 648 
(announcement period:  
November 23, 2009 to May, 2010) 
      
Source: IDFC Analysis  
 
 
 
 © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. 
Policy Group Sector Update                         Page | 4 of 4 
Project length by lanes: dominance of 4-Laning projects to decrease  
A little over half of the project pipeline comprises 4-laning of highways, with the other half of the 
pipeline equally divided between 2- and 6-laning projects. In the future, with Phases IV to VII 
picking momentum, more 2- and 6- laning projects are anticipated.  As per the 2010-11 annual 
plan, of the 9,000 kilometers envisaged to be awarded, 30% each would be 2-laning and 6-laning 
projects.  The beginning of this trend is visible in the slight decrease in the proportion of 4-laning 
projects from 59% in the winning bid stage to 53% in the RFQ and 51% in the RFP stages (see 
Figure 2).  
 
Figure 2: Decreasing Proportion of 4-Lane Projects in Pipeline 
 
Source: IDFC Analysis; Based on 113 projects, of which 33 projects are in RFQ,  
              36 in RFP and 44 in Winning Bid stage.   
 
The current project pipeline reveals significant inter-regional differences in project award with 
almost 40% of projects (by length) in the western states, followed by around one-quarter in the 
east, followed by one-fifth in the north and the south, respectively. Among the 4-laning projects, 
approximately three-quarters of the projects are concentrated in the west and the east (almost 
equal proportions) and the remaining one-quarter equally distributed in the north and the 
south.   
 
Among the states, Madhya Pradesh, Uttar Pradesh and Bihar lead in 2-laning projects, while 
West Bengal, Madhya Pradesh, Rajasthan and Gujarat lead in 4-laning projects.  Almost half of 
the 6-laning projects fall in the west, with Rajasthan, Gujarat, and Goa taking the lead. 
 
Impact of shift in project type 
Data on projects in the pre-award stage show that for 4- and 6-laning projects, while the cost per 
lane-km does not vary much by lane width (see Figure 3), the average project cost varies 
substantially. A typical 6-laning project costs almost twice as much as a 4-laning project (see 
Figure 4), primarily due to the longer length (see Figure 5). As the project cost increases, the set 
of technically and financially qualified bidders reduces. Further, developers are barred from 
bidding for new projects if they have three or more projects which have not achieved financial 
closure. Given that more 6-laning and expressways project would be awarded in the future, and 
the need for equity capital would increase, bidders could explore options such as private equity 
funds and foreign investors. 
 
 © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. 
Policy Group Sector Update                         Page | 5 of 5 
                   
 
 
 
Figure 3: Average Cost Per Lane-Km   Figure 4: Average Cost Per Project 
   (Cr.)                   (Cr.) 
Source: IDFC Analysis based on NHAI cost estimates for 114 
projects 
Source: IDFC Analysis based on NHAI cost estimates for 114  projects 
Note: The project cost displays significant variation at the project-
level. The averages above are only indicative and should not be 
construed as a norm. 
 
Figure 5: Average Project Length  
(Km) 
 
               Source: IDFC Analysis based on 112 projects 
 
Continued reliance on government support 
The PPP projects still rely on government support, with almost two-thirds of the projects for 
which winning bids were announced post-BKCC requiring grant or annuity (in 55:45 grant to 
annuity ratio).  The remaining one-third were on premium basis wherein the concessionaires 
paid a specified sum annually to the government. The total grant amount is approximately Rs. 
3,469 crore on total project cost of Rs. 17,006 crore, or 20% of the project cost. Finer grained 
analysis at the regional- and state-level reveals that projects in the east (led by West Bengal) and 
the north (led by Jammu and Kashmir and Uttar Pradesh) require much higher government 
support – 90% and 83%, respectively. High reliance on government support is largely due to 4-
laning of highways connecting smaller cities of Uttar Pradesh (such as Bareilly-Sitapur, 
Moradabad-Bareilly Muzzafarnagar-Haridwar-Dehradun) and West Bengal (such as Farakka-
Raiganj, Behrampore-Farakka and Raiganj-Dalkhola in the central part of the state) 
 
The reliance on government support is expected to increase in the future as more Phase IV (2-
laning of 20,000 km of highways) projects are offered on stretches with low traffic volumes. 
Indeed all the 2-laning projects for which winning bids have been announced need government 
 © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. 
Policy Group Sector Update                         Page | 6 of 6 
support (they were all offered on annuity basis). In contrast one-third of the 6-laning projects 
need government support (see Figure 6).   
 
Figure 6: Decrease in Government Support with Lane Width Increase 
100%
67%
36%
33%
64%
0%
20%
40%
60%
80%
100%
120%
2 lane 4 lane 6 lane
Government Support Needed (Annuity or Grant Projects)
No Government Support Needed (Premium Projects)
 
Source: IDFC Analysis based on 44 projects 
 
 
 
IDFC Ltd., Naman Chambers, C-32, G-Block, BKC, Bandra (East), Mumbai – 400 051, India. 
Tel: +91 22 4222 2000 Fax: +91 22 2654 0347 Website: http://www.idfc.com 
For further information:- 
Ritu Anand 
(ritu.anand@idfc.com) 
+91 22 42222145 
Dr. Shishir Mathur  
(shishir.mathur@idfc.com) 
+91 22 42222238 
Kunal Katara 
(kunal.katara@idfc.com) 
+91 22 42222319 
Secretarial Support 
Lavi D’Costa 
+91 22 42222146 
 
 
 
 
 
 
 
 


Roads: Leading Indicators Show Ramp-Up in Activity

SJSU ScholarWorks

San Jose State UniversitySJSU ScholarWorksFaculty Publications, Urban and Regional Planning Urban and Regional PlanningJanuary 2010Roads: Leading Indicators Show Ramp-Up inActivitySHISHIR MATHURSan Jose State University, mathurshishir1@gmail.comKunal KataraFollow this and additional works at: https://scholarworks.sjsu.edu/urban_plan_pubPart of the Infrastructure Commons, Public Economics Commons, Public Policy Commons,Real Estate Commons, Transportation Commons, Urban, Community and Regional PlanningCommons, Urban Studies Commons, and the Urban Studies and Planning CommonsThis Presentation is brought to you for free and open access by the Urban and Regional Planning at SJSU ScholarWorks. It has been accepted forinclusion in Faculty Publications, Urban and Regional Planning by an authorized administrator of SJSU ScholarWorks. For more information, pleasecontact scholarworks@sjsu.edu.Recommended CitationSHISHIR MATHUR and Kunal Katara. "Roads: Leading Indicators Show Ramp-Up in Activity" Faculty Publications, Urban andRegional Planning (2010). © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. Policy Group Sector Update                         Page | 1 of 1   Buoyed by the streamlining of the project award process and increased focus on the resolution of implementation-related problems, the highways sector is ramping up to meet the 2010-11 plan target.  Leading indicators show that 90% of this year’s project award target could be met at the current rate.  As larger projects come up for bidding, as is the case this year, developers could turn to financial investors to meet their equity requirements.   Upsurge in activity after a long lull The upgradation of the national highways, which is primarily carried out under the National Highway Development Project (NHDP), is emerging out of challenging times.    After a three-year slowdown, which was marked by the economic downturn in 2008-09, parliamentary elections and impediments to the bidding process, 2009-2010 witnessed an uptick in activity in the highways sector. Road length completed increased by approximately 25%. The project award activity increased more than 5-fold from 638 km to 3,360 km, although it fell well short of the target. Going forward, the project award activity is envisaged to grow more than 2.5 times during 2010-11 to 9,000 km (see Figure 1).    Figure 1:  Significant Increase in Concessions Awarded in 2009-10  (Km) 2351754 6361683 22032693 25001305474017261234 63833609000020004000600080001000012000140002004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11*Road length completeContracts/Concessions awarded *Projected targets per Ministry of Road Transport and Highways(MORTH) Source: MORTH, NHAI   Leading indicators look promising Two leading indicators, project awards and land acquisition rate, show significant improvement.    Project awards have grown multi-fold: In November 2009, the B.K. Chaturvedi Committee (BKCC) proposed changes to the bidding documents and the Model Concession Agreement (MCA). Some of the key changes were relaxing the conflict of interest clause by increasing    POLICY GROUP RESEARCH Roads  Leading Indicators Show Ramp-up in Activity  June 2010 Dr. Shishir Mathur & Kunal Katara   © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. Policy Group Sector Update                         Page | 2 of 2 the common shareholding limit among consortium partners, allowing developers an early exit after project completion, and allowing concessionaire capacity augmentation, instead of contract termination, should the actual traffic exceed the capacity for three consecutive years. These changes have contributed to a very significant increase in the project award activity. While only 8 projects totaling 643 km were awarded in the entire 2008-09, winning bids have been announced for 28 projects, totaling close to 2,200 km during the 5 months after the implementation of the BKCC (see Table 1).   Winning bids for an additional 19 projects totaling close to 1,900 km have already been announced in the first two months of the current financial year!   Table 1: Upsurge in Project Award Activity Project Description No of Projects Length (km) Project Cost (Cr.) FY 2008-09: Projects Awarded 8 643 8,591 Pre- BKCC (April - Oct 2009): Projects awarded 10 944 9,606 Post-BKCC  (Nov 2009 - March 2010): Projects w/ winning bids 28 2,177 21,830 (April  - May 2010): Projects w/ winning bids 19 1,874 22,084 Source: IDFC Analysis   Land acquisition rate has doubled: More than 3/4th of the completed NHAI projects were delayed, primarily due to land acquisition problems. Multiple steps are being taken to address the problems. The steps include appointment of senior officials by both the NHAI and the state governments to resolve the implementation problems, and creation of Special Land Acquisition Units (SLAUs), one for each highway project, to expedite land acquisition process. As a result, more than double the land (8,191 ha) was acquired in 2009-10 (till February, 2010) compared to the annual average (4,000 ha) of the previous three years.     Time reduction in the post-RFQ submission stage likely to be reduced even further as RFQ stage is to be done away in the future: Post-BKCC, it took projects 8 months from the RFQ submission date to the announcement of the winning bids, a little improvement over the pre-BKCC period when some projects languished in this stage for more than a year.  However, the time needs to be further shortened. Going forward, acting on a BKCC recommendation, the government is likely to conduct an annual technical qualification assessment of the potential bidders, thereby obviating the need for a separate RFQ for each project. This step should shave off, at the minimum, 3-4 months from the pre-project award time.   So where do we stand now? The National Highways Authority of India (NHAI), through the seven phases of NHDP, aims to upgrade 54,454 km of national highways (see Table 2).  The majority of projects under Phase I and II are complete or under implementation. Currently the bulk of the pre-construction activity is in Phase III and V with a sprinkling of Phase IV and Phase VII projects (5 in Phase IV and 1 in Phase VII) in the pre-award stage. We anticipate both these phases should pick up speed this financial year.   As of March 2010, 25% of the highway development was complete, a little over 10% under implementation and over 60% yet to be awarded.  Clearly, the NHDP programme is well behind schedule, and Phases III to VII are likely to be delayed by several years.    © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. Policy Group Sector Update                         Page | 3 of 3 Table 2: Progress of NHDP up to March 2010: Over 60% yet to be Awarded NHDP Phases Project Description Total Length (km) Length Compl-ted(%) Length under Implementa-tion(%) To be Awarded(%) Likely Date of Completion NHDP-I Golden Quadrilateral (GQ),  North South- East West (NS-EW) Corridor, Port Connectivity & Others 7,498 98% 2% 0.1% - NHDP-II 4/6-laning  NS-EW Corridor, Others 6,647 67% 24% 9% Substantially by Dec - 2010 NHDP-III  Upgradation, 4/6-Laning 12,109 13% 32% 55% Dec - 2013 NHDP-IV 2-Laning with Paved Shoulders 20,000 (5,000 km approved under Phase-A) - - 100% Dec - 2015 NHDP-V 6-Laning of GQ and High Density corridor 6,500 3% 19% 78% Dec - 2014 NHDP-VI Expressways 1,000 - - 100% Dec - 2015 NHDP-VII Ring Roads, Bypasses and Flyovers and Other  Structures 700 - 6% 94% Dec - 2014 Total  54,454 25% 13% 63% - Source: NHAI  What do the leading indicators tell us?  We are gearing up to meet the 2010-11 plan target but the momentum needs to increase For the year 2010-11 the government has set a target of building 2,500 km of roads and awarding projects totaling 9,000 km.   The current pipeline of projects in RFQ, RFP, and winning bid stages (about 650 km/month - see Table 3) suggest that, at the current rate, approximately 8,000 km of work can be awarded per year, or 90% of the Ministry’s 2010-11 target of 9,000 km.   Table 3: Project Pipeline: A Steady Flow on per Month Basis  Length (km) Cost (Cr.) Number of Projects Avg. Project Length (km) Avg. Project Cost (Cr.) km/per Month Projects in RFQ Stage (submission months: Jan-June 2010) 3,686 30,390 35 105 868 614 Projects in RFP Stage (submission months: Feb-June 2010) 3,335 18,616 33 108 564 667 Project w/winning bids 4,052 43,914 47 86 934 648 (announcement period:  November 23, 2009 to May, 2010)       Source: IDFC Analysis      © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. Policy Group Sector Update                         Page | 4 of 4 Project length by lanes: dominance of 4-Laning projects to decrease  A little over half of the project pipeline comprises 4-laning of highways, with the other half of the pipeline equally divided between 2- and 6-laning projects. In the future, with Phases IV to VII picking momentum, more 2- and 6- laning projects are anticipated.  As per the 2010-11 annual plan, of the 9,000 kilometers envisaged to be awarded, 30% each would be 2-laning and 6-laning projects.  The beginning of this trend is visible in the slight decrease in the proportion of 4-laning projects from 59% in the winning bid stage to 53% in the RFQ and 51% in the RFP stages (see Figure 2).   Figure 2: Decreasing Proportion of 4-Lane Projects in Pipeline  Source: IDFC Analysis; Based on 113 projects, of which 33 projects are in RFQ,                36 in RFP and 44 in Winning Bid stage.    The current project pipeline reveals significant inter-regional differences in project award with almost 40% of projects (by length) in the western states, followed by around one-quarter in the east, followed by one-fifth in the north and the south, respectively. Among the 4-laning projects, approximately three-quarters of the projects are concentrated in the west and the east (almost equal proportions) and the remaining one-quarter equally distributed in the north and the south.    Among the states, Madhya Pradesh, Uttar Pradesh and Bihar lead in 2-laning projects, while West Bengal, Madhya Pradesh, Rajasthan and Gujarat lead in 4-laning projects.  Almost half of the 6-laning projects fall in the west, with Rajasthan, Gujarat, and Goa taking the lead.  Impact of shift in project type Data on projects in the pre-award stage show that for 4- and 6-laning projects, while the cost per lane-km does not vary much by lane width (see Figure 3), the average project cost varies substantially. A typical 6-laning project costs almost twice as much as a 4-laning project (see Figure 4), primarily due to the longer length (see Figure 5). As the project cost increases, the set of technically and financially qualified bidders reduces. Further, developers are barred from bidding for new projects if they have three or more projects which have not achieved financial closure. Given that more 6-laning and expressways project would be awarded in the future, and the need for equity capital would increase, bidders could explore options such as private equity funds and foreign investors.   © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. Policy Group Sector Update                         Page | 5 of 5                       Figure 3: Average Cost Per Lane-Km   Figure 4: Average Cost Per Project    (Cr.)                   (Cr.) Source: IDFC Analysis based on NHAI cost estimates for 114 projects Source: IDFC Analysis based on NHAI cost estimates for 114  projects Note: The project cost displays significant variation at the project-level. The averages above are only indicative and should not be construed as a norm.  Figure 5: Average Project Length  (Km)                 Source: IDFC Analysis based on 112 projects  Continued reliance on government support The PPP projects still rely on government support, with almost two-thirds of the projects for which winning bids were announced post-BKCC requiring grant or annuity (in 55:45 grant to annuity ratio).  The remaining one-third were on premium basis wherein the concessionaires paid a specified sum annually to the government. The total grant amount is approximately Rs. 3,469 crore on total project cost of Rs. 17,006 crore, or 20% of the project cost. Finer grained analysis at the regional- and state-level reveals that projects in the east (led by West Bengal) and the north (led by Jammu and Kashmir and Uttar Pradesh) require much higher government support – 90% and 83%, respectively. High reliance on government support is largely due to 4-laning of highways connecting smaller cities of Uttar Pradesh (such as Bareilly-Sitapur, Moradabad-Bareilly Muzzafarnagar-Haridwar-Dehradun) and West Bengal (such as Farakka-Raiganj, Behrampore-Farakka and Raiganj-Dalkhola in the central part of the state)  The reliance on government support is expected to increase in the future as more Phase IV (2-laning of 20,000 km of highways) projects are offered on stretches with low traffic volumes. Indeed all the 2-laning projects for which winning bids have been announced need government  © Infrastructure Development Finance Company Limited (IDFC). All rights reserved.  No part of this document may be reproduced or transmitted in any form without the written consent of IDFC or as provided by law. Policy Group Sector Update                         Page | 6 of 6 support (they were all offered on annuity basis). In contrast one-third of the 6-laning projects need government support (see Figure 6).    Figure 6: Decrease in Government Support with Lane Width Increase 100%67%36%33%64%0%20%40%60%80%100%120%2 lane 4 lane 6 laneGovernment Support Needed (Annuity or Grant Projects)No Government Support Needed (Premium Projects) Source: IDFC Analysis based on 44 projects    IDFC Ltd., Naman Chambers, C-32, G-Block, BKC, Bandra (East), Mumbai – 400 051, India. Tel: +91 22 4222 2000 Fax: +91 22 2654 0347 Website: http://www.idfc.com For further information:- Ritu Anand (ritu.anand@idfc.com) +91 22 42222145 Dr. Shishir Mathur  (shishir.mathur@idfc.com) +91 22 42222238 Kunal Katara (kunal.katara@idfc.com) +91 22 42222319 Secretarial Support Lavi D’Costa +91 22 42222146         

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Roads: Leading Indicators Show Ramp-Up in Activity

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