viability gap funding for ppp projects in bot highway sector

ACKNOWLEDGEMENT

VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR

Prithviraj Gohil (2405) B.Tech (Civil Construction), CEPT University

ACKNOWLEDGEMENT

First and foremost I offer my sincerest gratitude to my supervisor, Mr. Sagar Deshmukh, who has

supported me throughout my thesis with his patience and knowledge whilst allowing me the room to work in

my own way. Without him this thesis would not have been completed or written. One simply could not wish

for a better or friendlier supervisor.

Then I offer my gratitude to Prof. C. B. Shah, Chairman of the Thesis Committee, School of Building

Science and Technology, CEPT University, for taking periodical reviews that helped me in finish my work at

scheduled intervals. He has always enlightened my ways with his thoughtful and constructive comments in the

reviews that helped me in focusing my vision and moving in the right direction.

I would also like to thank Mr. S H. Vora (General Manager, L&T- ECC Division), Mr. M. Ramesh (Chief

Project Officer, RJVRP) Mr. A Prajapati (Managing Director, GSRDC), other Engineers and Managers of L&T-ECC

Division at Rajkot-Jamnagar-Vadinar Road Project for devoting special time to help develop this thesis.

I would also like to take this opportunity to express my gratitude towards the School of Building

Science and Technology which helped me over the years to develop myself as a person and made me capable

enough of completing this thesis.

Last but not the least, I am greatly thankful to my family for their faith in me, their support and many

sacrifices made over the entire period of this thesis to help me complete my work without distraction.

Prithviraj Gohil (2405)

School of Building Science and Technology,

CEPT University

ABSTRACT



INDEX

CHAPTER - 1 INTRODUCTION PAGE NO.

1.1 INTRODUCTION 1

1.2 NEED FOR STUDY 3

1.3 OBJECTIVES 4

1.4 RESEARCH METHODOLOGY 4

1.3 SCOPE OF WORK 6

CHAPTER - 2 LITERATURE STUDY PAGE NO.

2.1 INTRODUCTION 7

2.2 PUBLIC PRIVATE PARTNERSHIP 8

2.3 BUILD OPERATE TRANSFER 12

2.4 VIABILITY GAP FUNDING 13

CHAPTER – 3 DATA COLLECTION PAGE NO.

3.1 INTRODUCTION 18

3.2 DATA COLLECTION METHODOLOGY 19

3.3 PROJECT DETAILS 20

3.4 LOCATION MAP 21

3.5 TRAFFIC DATA 22

3.6 PROJECT COSTS 29

CHAPTER – 4 DATA ANALYSIS PAGE NO.

4.1 INTRODUCTION 34

4.2 COST OF PROJECT 34

4.3 TRAFFIC FORCAST 42

4.4 REVENUE GENERATION (TOLL) 44

4.5 FINANCIAL ANALYSIS 46

CHAPTER – 5 CONCLUSION PAGE NO.

5.1 CONCLUSION OF STUDY 48

ABSTRACT



CHAPTER – 6 FUTURE SCOPE PAGE NO.

6.1 FUTURE SCOPE OF STUDY 50

BIBLIOGRAPHY PAGE NO.

REFERENCES 51

ANNEXURES PAGE NO.

ANNEXURE – 1 52

ANNEXURE – 2 52

ANNEXURE – 3 52

ANNEXURE – 4 53

ANNEXURE – 5 53

ANNEXURE – 6 54

LIST OF TABLES PAGE NO.

1.1 ROAD LENGTH DATA 1

1.2 CHANGE IN TREND OF ROAD TRAFFIC 2

3.1 TRAFFIC SURVEY DETAIL 22

3.2 AVERAGE DAILY TRAFFIC VOLUME (ADT IN VEHICLES) 23

3.3 ANNUAL AVERAGE DAILY TRAFFIC VOLUME (AADT IN VEHICLES) 23

3.4 TRAFFIC CONSUMPTION 24

3.5 PEAK HOUR SHARE OF TRAFFIC 24

3.6 TRAFFIC VOLUME - SALIENT FEATURES 25

3.7 BREAKUP OF TRIPS – INTERNAL AND EXTERNAL TO GUJARAT 26

3.8 TREND BASED GROWTH RATES 29

3.9 UNIT RATE OF STRUCTURES 30

3.10 STRUCTURE DETAILS ON THE CORRIDOR 31

3.11 TOTAL CONSTRUCTION COST 32

3.12 TOTAL PROJECT COST 32

4.1 TOTAL CONSTRUCTION COST – SCENARIO 1 35

4.2 TOTAL PROJECT COST – SCENARIO 1 36







4.9 ANNUAL TRAFFIC FORCAST (RAJKOT TO JAMNAGAR BYPASS) 43

4.10 ANNUAL TRAFFIC FORCAST (JAMNAGAR BYPASS TO VADINAR) 43

ABSTRACT



4.11 TOLL RATES 44

4.12 TOLL RATES/TRIP (RAJKOT TO JAMNAGAR BYPASS) 45

4.13 TOLL RATES/TRIP (JAMNAGAR BYPASS TO VADINAR) 45

4.14 FINANCIAL ANALYSIS 46

LIST OF FIGURES PAGE NO.

1.1 RESEARCH METHODOLOGY 5

2.1 EXISTING SCENARIO OF PPP IN VARIOUS SECTOR IN INDIA 11

3.1 DATA COLLECTION METHODOLOGY 19

3.2 LOCATION MAP OF CASE STUDY 21

3.3 R-J-V PASSENGER DESIRE LINE 27

3.4 R-J-V FREIGHT TRAFFIC DESIRE LINE 28

3.5 LOGISTIC MAP OF CORRIDOR 31

4.1 TRAFFIC COMPOSITION SURVEY 42

INTRODUCTION


Prithviraj Gohil (2405) Page 1 B.Tech (Civil Construction), CEPT University

1.1 INTRODUCTION

India has a road network of over 3.314 million kilometers (2.059 million miles) of roadway, making it

the third largest road network in the world behind Monaco and Macau only. At 0.66 km of highway per square

kilometer of land the density of India’s highway network is higher than that of the United States (0.65) and far

higher than that of China's (0.16). Historically, the funds set aside for the maintenance and expansion of the

road network have been insufficient, but major efforts are currently underway to modernize the country's

road infrastructure.

The road infrastructure breakup of India is as follows:

S.No. Catagory Length (in km)

1 National Highways/Expressways 66,754

2 State Highways 128,000

3 Major district roads 470,000

4 Rural & other roads 2,650,000

Total (approx) 3,314,754

Table 1.1: ROAD LENGTH DATA

About 65 per cent of freight and 86.7 per cent passenger traffic is carried by the roads. Although

National Highways constitute only about 2 per cent of the road network, it carries 40 per cent of the total road

traffic. The number of vehicles has been growing at an average pace of 13.10 percent per annum over the

years 1999-2000 to 2007-08, whereas the share of road in total traffic has grown from 13.8 per cent of freight

INTRODUCTION



traffic and 15.4 per cent of passenger traffic in 1950-51 to an estimated 65 per cent of freight traffic and 86.7

per cent of passenger traffic by the end of 2007-08.

Change in trend of traffic over the years is as follows:

Years Freight Traffic Passenger Traffic

1950-51 13.8 15.4

2007-08 65 86.7

Table 1.2 CHANGE IN TREND OF ROAD TRAFFIC

Today, advanced technology & mechanization has touched all the field of construction & has made

the construction process more complex & uncertain.

Therefore, Governments worldwide have shown increasing initiatives in private finance of public

infrastructure and services across a wide range of industries and sectors, including Power, Transportation,

Water supply and disposal, Telecommunications, Oil and Gas. Historically, investments in the infrastructure,

particularly in the highways, were being made by the government mainly due to the need of huge volume of

resources required, long gestation period, uncertain returns and various associated externalities. The galloping

resource requirements and the concern for managerial efficiency and consumer responsiveness have led in

recent times to an active involvement by the private sector also.

Roads and Highways are amongst one of the priority sectors. Governmental budgets are to deal with

number essentials along with infrastructure. Beyond this if one has to have accelerated growth of road

infrastructure Government funding alone is constrained. Private sector pitching in and providing momentum is

need of the time.

Since 1990s Government worldwide have resorted to such initiatives such as privatization of the

public assets, contracting out of services which were traditionally being provided by the public sector, or the

use of the private capital to build social infrastructure. Historically, road infrastructure has been provided by

the State. The enormous investment requirement, long gestation period and uncertainty of returns were

mainly responsible for the lack of interest by the private sector. The presence of significant externalities also

warranted the dominant role of the State in providing basic road infrastructure. In the allocation of budgetary

resources, therefore, the development of road infrastructure is still given priority. However, the resource

requirements for maintenance and expansion have far exceeded the capacity of the budget, making a strong

case for private sector participation. Resource constraints, however, are not the only reason for encouraging

private sector participation in the development of road infrastructure. A number of benefits accrue as a result

of private sector participation in the development of road infrastructure. The most palpable benefit is the

expansion of road network. In addition, private sector participation is expected to help upgrade the

technology, improve the quality and lower the costs.

As per the Database compiled by the Department of Economic Affairs, Ministry of Finance,

Government of India, there are 262 road projects in PPP mode - 82 road projects entailing collective project

INTRODUCTION



cost of Rs. 31,335 crore mostly contracted by NHAI (Centre) and 180 road projects entailing collective project

cost of Rs. 49,457 crore contracted by various State Governments as of July 2009.

PPP initiative in the Roads Sector has been largely on the BOT basis. The policy framework for toll-

based BOT projects was approved in 1997. Contracts based on BOT model are inherently considered superior

to the traditional Engineering Procurement and Construction (EPC) contracts as BOT projects ensure higher

quality of construction and maintenance of roads and completion of projects without cost and time overrun.

And after the concession period, which can range up to 30 years, road is to be transferred back to the

Government/public sector by the concessionaire.

Also, to attract the private sector to projects that are not commercially viable but considered

essential, the government has established a Viability Gap Funding (VGF) mechanism to provide a grant of up to

40% of the project cost.

Viability Gap Funding (VGF) Scheme addresses the following concerns:

• Address the issue of ‘affordability’ of user fee

• Leverage government grant to improve commercial viability of projects

• Promote user pay principle

• Ensure market based selection of promoter

• Promote concept of developer (in place of contractor) and address project life cycle costs

1.2 NEED FOR STUDY

This Scheme aims to ensure wide spread access to infrastructure provided through the PPP framework by

subsidizing the capital cost of their access. Meeting the funding gap to make economically essential projects

commercially viable would obviate the need for Government funding for such projects and allow private sector

participation in the projects, thus facilitating private sector efficiencies in infrastructure development.

This is a relatively new concept in PPP Projects and it addresses the following concerns connected to them:

• It addresses the issue of ‘affordability’ of user fee

• It leverages government grant to improve commercial viability of projects

• It ensures market based selection of promoter

• It promotes the concept of developer (in place of contractor) and addresses project life cycle costs.

INTRODUCTION



1.3 OBJECTIVES

• To find out the requirement of Viability Gap Funding Scheme in BOT Projects in Highway Sector.

• To establish the needs and/or advantages of VGF Scheme in PPP projects in highway sector in Gujarat.

• To prepare a hypothetical model using the Viability Gap Funding Scheme, over an existing, already

completed BOT Highway sector project, to justify the scheme.

1.4 RESEARCH METHODOLOGY

The research methodology includes the analytical research over primary as well as secondary data, where

Research mainly comprises of Literature Reviews from various national & international journals on highway

sector, presentations prepared by experts, various reports prepared by individuals, groups, committees and

organisations as well as certain reviews related to BOT highways projects. The data collection is done basically

from primary sources and few from secondary sources as well. The data obtained by case studies is also

analyzed to arrive at the quantitative values for justifying the above analysis.

As per the data collected, analysis is carried out on the probabilistic approach as well as by manual evaluation

of facts.

INTRODUCTION



Figure 1.1 RESEARCH METHODOLOGY

• MANUAL EVALUATION BY FACTS

• PROBABILISTIC APPROACH

DATA COLLECTION

DATA ANALYSIS

COMMENTS, SUGGESTIONS AND

CONCLUSION

• ORGANISATIONS CONNECTED WITH

THE ABOVE PROJECTS, CONSULTANTS,

AGENCIES, ETC.

• LARSON & TOUBRO – ECC DIVISION

• GUJARAT STATE ROAD DEVELOPMENT

CORPORATION (GSRDC)

• GUJARAT INFRASTRUCTURE

DEVELOPMENT BOARD (GIDB)

• END USERS

LITERATURE STUDIES

• NATIONAL AND INTERNATIONAL JOURNALS

• WEB SITES

• NEWSPAPERS

• PRESENTATIONS PREPARED BY EXPERTS

AND ORGANISATIONS

• REPORTS, THESIS’ ON SIMILAR TOPICS.

INTRODUCTION



1.5 SCOPE OF WORK

• Work Hypothesis

o I have defined the feasibility of VGF Scheme for State highway in Gujarat region.

o Case Study: ‘Rajkot-Jamnagar-Vadinar Road Project on SH-25 from Rajkot to Jamnagar’. And

‘Ahmedabad-Viramgam-Maliya Road Project on SH-7 and SH-17 from Ahmedabad to Maliya’.

The project details in conceiving, development and implementation stages, contract

conditions, relevant clauses, etc.

• Geographical

o Case Study of above mentioned projects.

LITERATURE REVIEW


Prithviraj Gohil (2405) Page 7 B. Tech (Civil Construction), CEPT University

2.1 INTRODUCTION

Government of India recognizes that there is significant deficit in the availability of physical

infrastructure across different sectors and that this is hindering economic development. The development of

infrastructure requires large investments that cannot be undertaken out of public financing alone, and that in

order to attract private capital as well as the techno-managerial efficiencies associated with it, the

Government is committed to promoting Public Private Partnerships (PPPs) in infrastructure development. The

Government of India recognizes that infrastructure projects may not always be financially viable because of

long gestation periods and limited financial returns, and that financial viability of such projects can be

improved through Government support. Therefore, the Government of India has decided to put into effect the

following scheme for providing financial support to bridge the viability gap of infrastructure projects

undertaken through Public Private Partnerships.

This scheme aims at supporting infrastructure projects that are economically justified but fall short of

financial viability. The lack of financial viability usually arises from long gestation periods and the inability to

increase user charges to commercial levels. Infrastructure projects also involve externalities that are not

adequately captured in direct financial returns to the project sponsor. Through the provision of a catalytic

grant assistance of up to 20% of the capital costs, several projects may become bankable and help mobilise the

much needed private capital and efficiencies. This scheme will be called the Scheme for Financial Support to

Public Private Partnerships (PPPs) in Infrastructure. It will be a Plan Scheme to be administered by the Ministry

of Finance. Suitable budgetary provisions will be made in the Annual Plans on a year-to-year basis.

LITERATURE REVIEW



2.2 PUBLIC PRIVATE PARTNERSHIP

o Understanding Public Private Partnership (PPP) Projects

It describes a government service or private business venture which is funded and operated through a

partnership of government and one or more private sector companies. These schemes are sometimes

referred to as PPP, P3 or P3. PPP involves a contract between a public-sector authority and a private

party, in which the private party provides a public service or project and assumes substantial financial,

technical and operational risk in the project.

Definition by Department of Economic Affairs, Ministry of Finance, Government of India

“PPP means an arrangement between a government or statutory entity or government owned entity

on one side and a private sector entity on the other, for the provision of public assets and/ or related

services for public benefit, through investments being made by and/or management undertaken by

the private sector entity for a specified time period, where there is a substantial risk sharing with the

private sector and the private sector receives performance linked payments that conform (or are

benchmarked) to specified, pre-determined and measurable performance standards.”

o Why we need to define PPPs?

• There is varying understanding amongst stakeholders as to what constitutes a Public Private

Partnership. There are views that a PPP is only when there is private investment, while others

contend that PPPs include all forms of interactions between the public sector and the private

sector, from consultations or policy dialogue and collaboration, to private provision of assets and

services.

• Definitions are also required to identify eligible projects or arrangements that could be

recipients of desired benefits or applicable procedures or treatment. For example, a project

when designated as a PPP, can access various modes of government support like viability gap

funding, project development funding etc. Further, some of the PPPs might involve contingent

liabilities for the sponsoring government, in various forms, such as, liabilities towards lenders in

case of contract termination or minimum revenue guarantees. The contingent liabilities require

the government to make requisite provisions in its budgets. The potential fiscal implication of

PPPs makes the parameters for its designation important.

LITERATURE REVIEW



• Furthermore, protection of user interests in PPPs and the need to secure value for public money,

demand a more rigorous treatment of such projects. The provision of the government support

also requires a higher public scrutiny of projects designated as PPPs.

• The specific requirements of the aspects mentioned above might require a different set of

projects to be designated as PPPs. For provision of government support to PPPs, the government

might give importance to requirements of private investment and user charges. On the other

hand, for approval of projects, the government would like to scrutinise even those projects

where private sector is engaged in providing a critical service to general public irrespective of

whether there is private investment or not.

• To cater to such different objectives and context, each competent government authority that

uses the PPP definition to designate projects as PPP would need to specify its own set of

essential conditions. Such conditions should be in addition to the common definition and should

be exclusively for a specific purpose like grant of VGF support, public scrutiny or provisioning of

contingent liabilities, etc.

o Why we need PPPs?

Development of infrastructure and provision of basis civic services has always been considered a very

important public sector activity for the following reasons:

• Governments have recognised the crucial role of infrastructure in fostering economic growth

and reducing poverty.

• Because of its ‘public good’ and ‘essential’ nature, Governments have attempted to ensure

availability of basic civic services irrespective of market conditions.

• For a number of economic, social and political reasons, private sector involvement in these

important areas was slow to develop and thus uneven.

• Provision of public services and infrastructure has traditionally been the exclusive domain of the

government. However, with increasing population pressures, urbanisation and other

developmental trends, government’s ability to adequately address the public needs through

traditional means has been severally constrained.

• This has led the Government’s across the world to increasingly look at the private sector to

supplement public investments and provide public services through Public Private Partnerships.

LITERATURE REVIEW



o Salient features of PPP

• Arrangement with Private Sector Entity: The asset and/or service under an arrangement will be

provided by the Private Sector Entity1 to the public.

• Public asset or service for public benefit: Has the element of facilities/ services being provided

by the Government as a sovereign to its people. To better reflect this intent, two key concepts

are elaborated below:

� ‘Public Services’ are those services that the State is obligated to provide to its citizens

(towards meeting the socio-economic objectives) or where the State has traditionally

provided the services to its citizens. For example, provision of security, law and order,

electricity, water, etc. to the citizens.

� ‘Public Asset’ is that asset the use of which is inextricably linked to the delivery of a Public

Service. For example, public road which is linked to public transportation or those assets

that utilize or integrate sovereign assets to deliver Public Services. For example, right of

way on highways, shore-land of about 0.5 km abutting the ocean, or use of river / water

bodies, etc. Ownership by Government need not necessarily imply that it is a PPP. For

example, a captive jetty is not a PPP even though it uses a sovereign asset, while a common

user port is a PPP as in the latter case the service is provided for use by public.

• Investments being made by and/or management undertaken by the private sector entity: It

provides for both investment and non-investment PPPs, which is also the international practice.

By broad basing the definition, India will gain access to a plethora of PPPs that focus on

efficiency to deliver quality services to the public.

• Operations or management for a specified period: Provides an element of time period after

which the arrangement with the private sector entity comes to a closure. Hence, the

arrangement is not in perpetuity.

• Substantial risk sharing with the private sector: It is typically specified to differentiate PPPs

from mere outsourcing contracts. For example, a facility service contract is also an outcome

based reward contract but not a PPP.

• Performance linked payments: It is to provide central focus on performance and not merely

provision of facility or service. A mere deferred payment contract should not get qualified as a

PPP.

• Conformance to performance standards: It is to provide a strong element of service delivery

aspect and the concepts of quality and compliance to pre-determined and measurable standards

to be specified by the sponsoring authority.

LITERATURE REVIEW



o Exclusions from PPP

• Any Engineering Procurement Construction (EPC) contract, whether payments are deferred or

on percentage completion of work or other terms, and where the management or operations

and maintenance of the asset is not retained by the private sector after three

completion of construction

• Any arrangement for supply of goods or services for a period of up to three years

• Any arrangement or contract that only provides for a hire or rent or lease of an asset without

any performance obligations and other es

Fig 2.1 EXISTING SCENARIO OF PPP PROJECTS IN VARIOUS SECTORS IN INDIA

o Eligibility of PPP Projects

In order to be eligible for funding under this Scheme, a PPP project shall meet the following criteria:

• The project shall be

operated for the Project Term by a Private Sector Company to be selected by the Government or

a statutory entity through a process of open competitive bidding, provided that in case of

railway projects that are not amenable to operation by a Private Sector Company, the

Empowered Committee may relax this eligibility criterion.

• The PPP Project should be from one of the following sectors:

� Roads and bridges, railways, seaports, airports, inland w

Airports

1%

Tourism

7%

Urban

Development

16%

Public Private Partnership Projects in various

RE REVIEW


Page 11 B. Tech (Civil Construction), CEPT University

from PPP

Any Engineering Procurement Construction (EPC) contract, whether payments are deferred or


and maintenance of the asset is not retained by the private sector after three

completion of construction

Any arrangement for supply of goods or services for a period of up to three years

Any arrangement or contract that only provides for a hire or rent or lease of an asset without

any performance obligations and other essential features of a PPP.

EXISTING SCENARIO OF PPP PROJECTS IN VARIOUS SECTORS IN INDIA

Eligibility of PPP Projects


The project shall be implemented i.e. developed, financed, constructed, maintained and



ay projects that are not amenable to operation by a Private Sector Company, the

Empowered Committee may relax this eligibility criterion.

The PPP Project should be from one of the following sectors:

Roads and bridges, railways, seaports, airports, inland waterways

Airports Education

0% Energy

5%

Ports

10%

Railways

1%

Roads

60%

Urban

Development

16%


Sectors


B. Tech (Civil Construction), CEPT University

Any Engineering Procurement Construction (EPC) contract, whether payments are deferred or


and maintenance of the asset is not retained by the private sector after three years from

Any arrangement for supply of goods or services for a period of up to three years

Any arrangement or contract that only provides for a hire or rent or lease of an asset without

EXISTING SCENARIO OF PPP PROJECTS IN VARIOUS SECTORS IN INDIA


implemented i.e. developed, financed, constructed, maintained and



ay projects that are not amenable to operation by a Private Sector Company, the

aterways


Airports

Education

Energy

Ports

Railways

Roads

Tourism

Urban Development

LITERATURE REVIEW



� Power

� Urban transport, water supply, sewerage, solid waste management and other physical

infrastructure in urban areas

� Infrastructure projects in Special Economic Zones

� International convention centres and other tourism infrastructure projects

2.3 BUILD OPERATE TRANSFER

o Understanding the Build Operate Transfer (BOT) Projects

It is a form of project financing, wherein a private entity receives a concession from the private

or public sector to finance, design, construct, and operate a facility stated in the concession contract.

This enables the project proponent to recover its investment, operating and maintenance expenses in

the project. Due to the long-term nature of the arrangement, the fees are usually raised during the

concession period. The rate of increase is often tied to a combination of internal and external

variables, allowing the proponent to reach a satisfactory internal rate of return for its investment.

Traditionally, such projects provide for the infrastructure to be transferred to the government at the

end of the concession period.

Build-Operate-Transfer is the best option for organizations that want to have their own captive

center, but do not possess local expertise or extensive resources necessary to set up near shore

operations using do-it-yourself approach. This type of arrangement is used typically in complicated

long-term projects as seen in power plants and water treatment facilities. In some arrangements, the

government does not assume ownership of the project. In those cases, the company continues

running the facility and the government acts as both the consumer and regulator.

o The 3 Stages of BOT Model

• Build: Set-up the facility and infrastructure, staff the development center, and establish

knowledge transfer

• Operate: Manage the offshore organization: Program Management, Development, QA,

maintenance, enhancements, and product support

• Transfer: Register a new offshore subsidiary for the customer, transfer assets, and handover

operations

LITERATURE REVIEW



o Benefits of BOT Model

• Cost savings compared to 3rd party vendor partnerships

• Direct control on hiring and retention

• Ability to retain Intellectual Property Rights

• Rapid , Seamless scaling of operations

• Wider service offerings, quickly filling business model gaps

• Lower infrastructure set-up costs

2.4 VIABILITY GAP FUNDING

o Understanding the Viability Gap Funding Scheme

The Viability Gap Funding Scheme provides financial support in the form of grants, one time or

deferred, to infrastructure projects undertaken through public private partnerships with a view to

make them commercially viable. Government of India has established a Viability Gap Fund to aid the

PPP infrastructure projects which face the viability gap due to inherent nature of the project. The

Scheme is administered by the Ministry of Finance.

The financial support (VGF) to be provided under this scheme shall be in the form of a capital grant at

the stage of project construction. The amount of VGF shall be equivalent to the lowest bid for capital

subsidy, but subject to a maximum of 20% of the total project cost. In case the sponsoring Ministry/

State Government/ statutory entity proposes to provide any assistance over and above the said VGF,

it shall be restricted to a further 20% of the total project cost.

o History

This scheme was formulated by the Ministry of Finance in consultation with the Planning Commission

and other stakeholders. The scheme was considered and approved by the Committee on

Infrastructure, chaired by the Prime Minister, and was subsequently endorsed by the Union Cabinet.

Following a notification by the Finance Ministry in January 2006, the scheme has been put in

operation and assistance to several projects is already under consideration.

LITERATURE REVIEW



This intervention enabled the Government to enhance private sector participation in critical

infrastructure sectors. By offering grant assistance of up to 20% of the project costs, the Government

was able to use its scarce budgetary resources to leverage a much larger pool of private capital.

o Why do we need VGF Scheme?

This scheme aims at supporting infrastructure projects that are economically justified but fall short of

financial viability.

• Investment decisions in the infrastructure sector through private sector engagement remains a

challenge, especially where there is lack of excludability.

• Infrastructure projects often have high social but an unacceptable commercial rate of return.

These are generally characterised by substantial investments, long gestation periods, fixed

returns, the inability to increase user charges to commercial levels, etc. that make it essential

that Government supports infrastructure financing, through appropriate financial instruments

and incentives.

• Capital grant, as an instrument of government support, to make socially viable projects

commercially viable through an efficient and transparent allocation basis, is an accepted

economic proposition. Infrastructure projects also involve externalities that are not adequately

captured in direct financial returns to the project sponsor.

• Through the provision of a catalytic grant assistance of up to 20% of the capital costs, several

projects may become bankable and help mobilise the much needed private capital and

efficiencies.

• Apart from the financial support to be made available under this scheme, an additional grant of

up to 20% can be provided by the sponsoring Ministry or State Government. The lead financial

institution for the project shall be responsible for regular monitoring and periodic evaluation of

project compliance with agreed milestones and performance levels, particularly for the purpose

of grant disbursement.

o Applicability of the VGF Scheme

• This Scheme will apply to PPP projects posed by the Central Ministries, State Governments and

statutory authorities, as the case may be, which owns the underlying assets.

• Proposals to be made under this scheme shall be considered for providing Viability Gap Funding

(VGF), one time or deferred, with the objective of making a PPP project commercially viable.

• The proposal shall relate to a Public Private Partnership (PPP) project which is based on a

contract or concession agreement between a Government or statutory entity on the one side

LITERATURE REVIEW



and a private sector company on the other side, for delivering an infrastructure service on

payment of user charges.

• The project should provide a service against payment of a pre-determined tariff or user charge.

• The quantum of financial support (VGF) to be provided under this Scheme shall be in the form of

a capital grant at the stage of project construction. The amount of VGF shall be equivalent to the

lowest bid for capital subsidy, but subject to a maximum of 20 percent of the total project cost.

In case the sponsoring Ministry/State Government/statutory entity proposes to provide any

assistance over and above the said VGF, it shall be restricted to a further 20 percent of the total

project cost.

o The Appraisal and Approval by Empowered Committee

• The proposal for seeking clearance of the Empowered Institution shall be sent (in six copies, both

in hard and soft form) to the PPP Cell of the Department of Economic Affairs. The proposal

should include copies of all project agreements (such as concession agreement, state support

agreement, substitution agreement, escrow agreement, O&M agreement and shareholders’

agreement, as applicable) and the project report.

• The proposal will be circulated by the PPP Cell to all members of the Empowered Institution for

their comments. All comments received within four weeks shall be forwarded by the PPP Cell to

the concerned Administrative Ministry, State Government or statutory authority, as the case

may be, for submitting a written response to each of the comments. In case the project is based

on a model concession agreement, the comments will be furnished within two weeks.

• The proposal, along with the project report, concession agreement and supporting

agreements/documents, together with the comments of the respective Ministries and the

response thereto, will be submitted by the PPP Cell to the Empowered Institution for

consideration and ‘in principle’ approval.

• While submitting the proposal to the Empowered Institution, the PPP Cell will indicate whether

the proposal conforms to the mandatory requirements of the Scheme. Deficiencies, if any, will

be indicated in the note of PPP Cell. In particular, the Department of Economic Affairs and the

Department of Expenditure will examine the proposals with a view to ensuring that they

conform to the conditions specified in the Scheme. Planning Commission will examine the

project report and the concession agreement with a view to ensuring that the proposal is

broadly in order.

• The Empowered Institution will either approve the proposal in principle (with or without

modifications) or advise the concerned Ministry, State Government or statutory authority, as the

LITERATURE REVIEW



case may be, to provide additional clarifications/information or to make necessary changes for

further consideration of the Empowered Institution.

• Approval under this Scheme will be for the purposes of this Scheme only. All other statutory,

financial or administrative approvals shall be obtained as applicable. For projects owned by the

Central Government or its statutory entities, approval of PPPAC shall also be obtained in

accordance with the guidelines issued by the Ministry of Finance. However, these approvals may

be obtained simultaneously in order to save on time.

• In cases where financial support is available from any other Ministry of the Central Government

under an on-going Scheme for assistance to PPPs, the proposal would be sent to such Ministry

for consideration. In case the Ministry recommends that the proposal be considered for

additional assistance under this Scheme, the same shall be submitted to the Empowered

Committee for consideration.

• Once cleared by the Empowered Institution, the project would be eligible for financial support

under this Scheme.

o Invitation to Bid

• Financial bids shall be invited by the concerned Ministry, State Government or statutory entity,

as the case may be, for award of the project within four months of the approval of the

Empowered Institution. This period may be extended by the Department of Economic Affairs, as

necessary.

• The private sector company shall be selected through a transparent and open competitive

bidding process. The criterion for bidding shall be the amount of VGF required by a private sector

company where all other parameters are comparable.

o Disbursement of VGF

• Within three months from the date of award, or such extended period as may be permitted, the

Lead Financial Institution shall present its appraisal of the project (in six copies, both in hard and

soft form) for consideration and approval of the Empowered Institution. The appraisal shall be

accompanied by an updated application along with the project report and project agreements.

The Lead Financial Institution shall verify the contents of the application and convey its

recommendation to the Empowered Institution.

• Prior to final approval by the Empowered Institution, the Ministry, State Government or

statutory authority, as the case may be, proposing the project, shall certify that the bidding

process conforms to the provisions of this Scheme and that all the conditions specified in the

Scheme have been complied with.

LITERATURE REVIEW



• Prior to disbursement, the Empowered Institution, the Lead Financial Institution and the private

sector company shall enter into a Tripartite Agreement in such format as may be prescribed by

the Empowered Committee from time to time.

• For the purposes of this Scheme, a Lead Financial Institution shall be the Financial Institution (FI)

that is funding the project, and in case of a consortium of FIs, the FI designated as such by the

consortium shall be the Lead Financial Institution.

• VGF shall be disbursed only after the private sector company has subscribed and expended the

equity contribution required for the project and will be released in proportion to debt

disbursements remaining to be disbursed thereafter.

• Viability Gap Funding up to Rs. 100 crore for each project will be sanctioned by the Empowered

Institution

• Proposals up to Rs. 200 crore will be sanctioned by the Empowered Committee.

• Amounts exceeding Rs. 200 crore will be sanctioned by the Empowered Committee with the

approval of Finance Minister.

• The Lead Financial Institution shall be responsible for regular monitoring and periodic evaluation

of project compliance with agreed milestones and performance levels, particularly for the

purposes of disbursing the VGF. It shall also send a quarterly progress report to the Empowered

Institution.

DATA COLLECTION



3.1 INTRODUCTION

Roads and Buildings Department (R&BD), Government of Gujarat has been implementing several road

projects over the years with the state, centre and multi-lateral funding. In addition, the state has implemented

road projects through private sector participation. Recognising the need to attract increased investments in

road development the R&BD, Gujarat Govt have set up the Gujarat State Road Development Corporation

Limited (GSRDC).

R&BD has identified important roads as core road network extending over 9,000 km. It also defined

the corridors of movement which are designated to act as catalyst for achieving the targeted economic

development of the state. The state also formulated a private sector policy in the road development and

identified corridors for posing under the PPP/PSP. In this context the GSRDC has identified three high density

corridors namely ‘Rajkot – Jamnagar – Vadinar’ Road, ‘Ahmedabad – Viramgam – Halvad – Maliya’ and ‘Halol –

Godhra – Shamalaji’ for capacity augmentation by converting them from existing two-lane to four-lane divided

carriageway roadway. Gujarat Govt seeked assistance from Govt of India under the Viability Gap Funding for

these selected road projects, which could not be implemented earlier, to meet growing travel demand on the

road system of Gujarat.

The practical aspect of the Viability Gap Funding Scheme will be better understood by these Case

Studies. These Case studies are the very first projects in the highway sector to be taken into this scheme in

Gujarat. The Main Case Study is done on Rajkot-Jamnagar-Vadinar Road Project (RJVRP), being constructed on

SH-25. It is the four laning paved shoulder project over the existing two lane State Highway – 25, starting from

Rajkot, and traverses through Dhrol, Falla, Jamnagar city, Reliance refinery and ends at Vadinar Port.

For financial analysis comparison, another Case Study is taken, the Ahmedabad-Viramgam-Maliya

Road Project. This is being constructed on SH-7 and 17, connecting Ahmedabad to Maliya, via Viramgam.

DATA COLLECTION



3.2 DATA COLLECTION METHODOLOGY

Figure 3.1 DATA COLLECTION METHODOLOGY

• Reports

• Manuals

• Thesis’

• Tender Documents

• Contract Documents

• Project Reports

• Feasibility Studies

Websites • Newspapers

• Magazines

DATA COLLECTION

PRIMARY DATA COLLECTION

QUESTIONNAIRES

• To the Client

• To the Concessionaire

• To End Users

INTERVIEWS

• At GSRDC (4 Persons)

• At GIDB (2 persons)

• At L&T- ECC (6 Persons)

SECONDRY DATA COLLECTION

DATA COLLECTION



3.3 PROJECT DETAILS

Name of Project : Rajkot-Jamnagar-Vadinar Road Project

Type : Infrastructure (Road)

Description : Construction of additional 2 lane for the Rajkot-

Jamnagar-Vadinar (RJVRP) under Viability Gap Funding

Scheme of Government of India on BOT Basis

End use of Project : Road Passenger and freight transportation

Owner : Gujarat State Road Transport Corporation (GSRDC)

Concessionaire : L&T Rajkot Jamnagar Tollways Pvt. Ltd

Concession Period : 20 Years

Contractor : L&T – ECC Division

Independent Consultant : (Not Appointed) LASA appointed as proof Consultant

PMC : Feed Back Ventures

Design Consultants : Sheladia Associates

Safety Consultant : Mott. McDonalds Pvt. Ltd.

Contract Value : 866.49 Crores

Length of Stretch : 131.3 Km

Project Start Date : 21-10-2009

Est. Construction Period : 820 days

Project Completion Date : 91-1-2012

DATA COLLECTION



3.4 LOCATION MAP

Fig 3.2 LOCATION MAP OF CASE STUDY

DATA COLLECTION



3.5 TRAFFIC DATA

o Traffic Survey Locations

For the evaluation of the traffic and travel characteristics on the project corridor from km 3/000 to km

125/500 (Rajkot to Vadinar) of SH-25, the total stretch has been segmented into homogeneous

sections, based upon the major intersections that act as main collectors or distributors of traffic along

the project corridor. These identified major interactions were taken as the base for the traffic study.

Location Chainage Survey Detail Survey Duration

Near Paddhari

At 23/000 km

Traffic Volume 7 Days

Origin Destination 1 Day

Axle Load 1 Day

Kizadia Bus Stop At 78/500 km Traffic Volume 7 Days

Near RTO Check Post At 94/000 km Traffic Volume 3 Days

Sikka Bus Stop

At 111/000 km

Traffic Volume 7 Days

Origin Destination 1 Day

Table 3.1 TRAFFIC SURVEY DETAIL

o Traffic Volume Levels -2006

The average daily traffic volume levels recorded by sections on project corridor were converted

annual average traffic volume levels9. The base year traffic levels are as given under:

DATA COLLECTION



Table 3.2 AVERAGE DAILY TRAFFIC VOLUME (ADT IN VEHICLES)

Table 3.3 ANNUAL AVERAGE DAILY TRAFFIC VOLUME (AADT IN VEHICLES AND PSUs)

DATA COLLECTION



Table 3.4 TRAFFIC COMPOSITION

Table 3.5 PEAK HOUR SHARE OF TRAFFIC

DATA COLLECTION



Table 3.6 TRAFFIC VOLUME - SALIENT FEATURES

DATA COLLECTION



Traffic composition (Table 3.4) reveals that goods traffic share vary from 35% to 45% or even more. It

is evident from PCU factor derived. The peak traffic share was observed to be varying very marginally

by sections. It is observed to be about 6.5% across the study sections (Table 3.5).

o Traffic Design Pattern

The Origin-Destination survey data was analysed. The trip ends were seen with respect to immediate

influence area zones, traffic originating and terminating within Gujarat state and traffic which has one

of the trip ends (either origin or destination) outside Gujarat. The mode wise break-up of trips internal

to Gujarat and external (to and from Gujarat) is given at Table 3.7. The desire line diagrams shown in

Figure 3.3 and Figure 3.4 suggest very high proportion of tollable traffic amongst the tollable modes.

Table 3.7 BREAK UP OF TRIPS INTERNAL AND EXTERNAL TO GUJARAT

DATA COLLECTION


Prithviraj Gohil (2405) Page 29

B. Tech (Civil Construction), CEPT

University

Fig 3.3 RAJKOT-JAMNAGAR-VADINAR PESSANGER DESIRE LINE

DATA COLLECTION


Prithviraj Gohil (2405) Page 30

B. Tech (Civil Construction), CEPT

University

Fig 3.4 RAJKOT-JAMNAGAR-VADINAR FREIGHT TRAFFIC DESIRE LINE

DATA COLLECTION



o Traffic Growth Rates

The traffic volume by sections is forecasted by growth rate approach. The growth rates considered

are moderate.

Mode 2006-10 2010-15 2015-20 2020-25

Scooter/ Moter Cycle 2.1 2.8 3.2 3.5

Auto Rickshaw/ Chakda 2.5 2.9 2.9 3.4

Car/ Jeep (OT) 2.8 3.4 3.4 3.9

Car/ Jeep (NT) 3.5 4.2 4.2 4.9

Mini Bus 2.8 2.2 2.0 2.0

Standard Bus 4.0 3.2 2.8 2.8

Tempo/ LCV 2.5 2.8 3.4 3.4

2- Axle Truck 2.7 3.0 3.6 3.6

3- Axle Truck 3.0 3.3 4.0 4.0

MAV 3.2 3.6 4.3 4.3

Tractor with Trailer 0.4 0.4 2.5 2.5

Tractor without Trailer 0.4 0.4 2.5 2.5

Cycle 1.6 1.9 1.9 2.2

Cycle Rickshaw 0.4 0.5 0.5 0.6

Animal Drawn 0.4 0.4 0.4 0.5

Others 1.8 2.1 2.1 2.5

Table 3.8 TREND BASED GROWTH RATES

3.6 PROJECT COSTS

As mentioned before, it is a four laning of an existing two lane project. As per the contract conditions,

it involves repair of existing two lane structure and construction of additional two lane. Therefore,

after discussions with the GSRDC, following schemes were adopted:

• Profile correction with BM – Average 50mm thick

• Overlay – DBM – 80mm, BC – 40mm

o Design of Structures

The new structures were proposed similar to that of GSHP. Based on

these, rates adopted for various structure items are:

DATA COLLECTION



Table 3.9 UNIT RATES OF STRUCTURES

DATA COLLECTION



Fig 3.5 LOGISTIC MAP OF THE CORRIDOR

S. No. Structures Quantity

1 Pipe Culverts 152

2 Box / Slab Culverts 56

3 Minor Bridges 42

4 Major Bridges 3

5 ROB's 2

Table 3.10 STRUCTURE DETAILS ON THE CORRIDOR

DATA COLLECTION



o Overall Civil Cost

The schedule of rates of the National Highway – Rajkot Division (NHRajkot), was used for estimating

cost of the project. Wherever required, the escalation was applied, also for some of the items realistic

rates were evaluated and used. Based on these, the base year construction costs were worked out.

They are as follows:

S. No. Description of Item Total Amount (in Crore Rs.)

1 Highway Cost 284.68

2 Intersections, Toll Plaza, Bus Bay/Bus Shelter 39.89

3 Structure Cost 142.9

4 Existing Road Maintenance 3.278

Total 470.76

Table 3.11 TOTAL CONSTRUCTION COST

o Total Project Cost

S. No. Type of Cost Total Amount (in Crore Rs.)

1 Civil Construction Cost 470.76

2 Contingency (10%) 47.08

3 Construction Supervision (3%) 15.54

4 Inflation During Constriction (15%) 70.84

Total 604.22

Table 3.12 TOTAL PROJECT COST

o Maintenance Cost

• Routine Maintenance – Rs. 40,000/km (Annual)

• Periodic Maintenance – Rs. 3,00,000/km (Every 5 years)

DATA ANALYSIS



4.1 INTRODUCTION

The viability of any infrastructure project depends on the following things:

• The ability of the state's economy to finance and sustain the created infrastructure.

• The ability of the state Government to support the development of projects through financial

and/or policy supports.

• The amount of Return on Investment (RoI). The yearly return, when calculated on the total

investment needed for the project, tells us about the Return on Investment.

• The simple rule to assess the viability is that the RoI must be greater than the cost of

investment.

4.2 COST OF PROJECT

o Favourable Options/Scenarios

Based on the obtained data, the financial analysis of the project has been undertaken to assess the

viability of the projects under a commercial format. However, in order to justify the financial viability

DATA ANALYSIS



of the project, the corridor is broken down into number of possible options/scenarios. Each of the

scenarios is assessed for its financial viability individually and in combination. The following scenarios

have been considered for undertaking the financial analysis:

• Scenario 1: Rajkot Jamnagar Vadinar as one corridor (126km)

• Scenario 2: Rajkot Jamnagar Vadinar as one corridor with an extra road spur of about 5 km;

(126km +5km)

• Scenario 3: Rajkot to start of Jamnagar bypass (75.2km)

• Scenario 4: Jamnagar Bypass to Vadinar (50.8km)

o Scenario 1

In this Scenario, the total length of the project is reduced by 5 (Five) Km, making it 126 Km. The ‘Spur

road’, or the portion of the road that lies on the Rajkot Bypass is not taken into consideration. The

portion was initially not a part of the project when it was first proposed by GSRDC. It is not a part of

the original SH-25 and was later added as individually that project was completely financially non

viable, even with any amount of grants. No Toll Plaza is to be constructed on that route.

However, it contains certain big structures that make the construction of the road a costly

affair for the State Govt. Removing that portion will not make any difference to the toll collection but

will reduce the cost of the overall project, making is economically more viable.

• Overall Civil Construction Cost

Rates Adopted: The schedule of rates 17 of the National Highway – Rajkot Division (NHRajkot)

were used for estimating cost of the project.

Where required escalation was applied, also for some of the items realistic rates were evaluated

and used.






Total 439.36

Table 4.1 TOTAL CONSTRUCTION COST – SCENARIO 1

DATA ANALYSIS



• Total Project Cost






Total 536.91

Table 4.2 TOTAL PROJECT COST – SCENARIO 1

• Maintenance Cost

Maintenance cost will be applied for the operation period only. The total concession period

includes the time for construction as well as operation. The projected construction time, as

mentioned before, is 820 days (2.25 Years).

The Periodic Maintenance cost will be calculated after every 5 Years after the completion of the

construction. Hence, the total No. of Periodic maintenance cycles will be 3 (Three)

� Routine Maintenance – Rs. 40,000/km (Annual)

� Periodic Maintenance – Rs. 3,00,000/km (Every 5 years)

• Total Cost by the completion time

� Project Cost (Rs. 536.91 Crore)

� Routine Maintenance Cost (Rs. 40,000 p.a./Km)

– No. of Years (Operation Period) = Concession Period – Construction Period)

– No. of Years = 20-2.25 = 17.75

– Therefore the Cost is = Rs. 40,000 p.a. * 126 Km * 17.75 Years = Rs. 8,94,60,000

� Periodic Maintenance Cost (Rs. 3,00,000 every 5 Years)

– No. of maintenance Cycles = 3

– Therefore the Cost is = Rs. 3,00,000 * 126 Km* 3 Cycles = Rs. 11,34,00,000

Therefore total Cost in Scenario 1 = Rs. 584.2 Crore

o Scenario 2

In this scenario, the total road stretch is taken as per the original project.

DATA ANALYSIS







and used.






Total 470.76








Total 604.22












DATA ANALYSIS





– No. of Years = 20-2.25 = 17.75

– Therefore the Cost is = Rs. 40,000 p.a. * 131 Km * 17.75 Years = Rs. 9,30,10,000



– Therefore the Cost is = Rs. 3,00,000 * 131 Km* 3 Cycles = Rs. 11,79,00,000


o Scenario 3

In this Scenario, the Project will only be from Rajkot to the start of the Jamnager Bypass. This project

lies entirely on the SH-25 only. The significance of this project is not there if it is taken individually as

the whole corridor is required to be developed. However, the idea here is that if the corridor is broken

down into one or more smaller projects, each given out separately to different bidders, the viability of

them individually may be more than the viability of the corridor as a whole.

In addition to that, it has some other advantages as follows:

� Smaller projects will be easier to manage and maintain.

� Due to the overall amount of capital investment reduced, smaller and local bidders and

also apply. This will in turn reduce the cost of mobilisation and initial field work for

establishing base.

� Easier to monitor by the Govt.





and used.






Total 262.78


DATA ANALYSIS









Total 337.28














– No. of Years = 20-2.25 = 17.75

– Therefore the Cost is = Rs. 40,000 p.a. * 75.2 Km * 17.75 Years = Rs. 5,34,00,000



– Therefore the Cost is = Rs. 3,00,000 * 75.2 Km* 3 Cycles = Rs. 6,77,00,000


DATA ANALYSIS



o Scenario 4

In this Scenario, the Project will only be from Jamnagar Bypass to Vadinar Port. It will include the

Jamnagar Bypass. This project also lies entirely on the SH-25 only. As for the previous project, the

significance of this project is not there if it is taken individually as the whole corridor is required to be

developed.





and used.






Total 176.58








Total 226.64








DATA ANALYSIS









– No. of Years = 20-2.25 = 17.75

– Therefore the Cost is = Rs. 40,000 p.a. * 50.8 Km * 17.75 Years = Rs. 3,60,68,000



– Therefore the Cost is = Rs. 3,00,000 * 50.8 Km* 3 Cycles = Rs. 4,57,20,000


DATA ANALYSIS



4.3 TRAFFIC FORCAST

o Traffic Composition

From the Traffic Study Data, the

follows:

Figure 4.1 TRAFFIC COMPOSITION SURVEY

Now, as per the Traffic Composition Survey, the we will be able to assess the type of traffic

encountered in the project corridor. The Traffic, as we see, mainly consists of the Cars/Jeeps, 2

Truck and 2 wheelers.

Now, as per the Annual Growth Rate

traffic is predicted for the entire concession period of the project.

1%

5%

6%

25%

4%

PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR

Page 42 B. Tech (Civil Construction), CEPT University

4.3 TRAFFIC FORCAST

Traffic Composition

From the Traffic Study Data, the traffic composition was found out. The traffic Composition is as

Figure 4.1 TRAFFIC COMPOSITION SURVEY


encountered in the project corridor. The Traffic, as we see, mainly consists of the Cars/Jeeps, 2

Now, as per the Annual Growth Rates projected based on the findings of updated SOS by GSHP, the

fic is predicted for the entire concession period of the project.

26%

9%

2%

20%

4%

1%

1%

Traffic Composition

Sc/Mc

Au Ric/Chakda

Car/Jeep (Old)

Car/Jeep (New)

Mini Bus

Std. Bus

Tempo/LCV

2-3 axle Truck

M. axle Truck

Tractor

Others

PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR

B. Tech (Civil Construction), CEPT University

traffic composition was found out. The traffic Composition is as


encountered in the project corridor. The Traffic, as we see, mainly consists of the Cars/Jeeps, 2-3 Axle

s projected based on the findings of updated SOS by GSHP, the

Au Ric/Chakda

Car/Jeep (Old)

Car/Jeep (New)

Tempo/LCV

3 axle Truck

M. axle Truck

DATA ANALYSIS



Table 4.9 ANNUAL TRAFFIC FORCAST (RAJKOT TO JAMNAGAR BYPASS)

Table 4.10 ANNUAL TRAFFIC FORCAST (JAMNAGAR BYPASS TO VADINAR)

DATA ANALYSIS



4.4 REVENUE GENERATION (TOLL)

o Toll Rates

The toll rates are those which have been recommended by the Ministry vide a notification in the year

1997. These have been escalated to prices as on 31st

March 2006. The per km toll rates as per the

escalation have been given in Table 4.9. The toll rates have also been calculated for the various

project corridor scenarios.

Mode Toll Rate (Rs./

Km)

Toll Rates (Rs./ Trip)

Rajkot-Jamnagar-

Vadinar

Rajkot to start of

Jamnagar Bypass

Jamnagar Bypass

to Vadinar

Car/Jeep 0.61 75 45 30

Mini Bus 1.07 135 80 55

Bus 2.13 270 160 110

LCV 1.07 135 80 55

2-Axle Truck 2.13 270 160 110

MAV 3.43 435 260 175

Table 4.11 TOLL RATES

For future, the toll rates have been assumed to increase at an inflation rate of 5% p.a. For estimation

of corridor level toll rate, this has been rounded to nearest five rupee.

Similarly, the toll rates are calculated for the entire Concession Period as follows:

DATA ANALYSIS



Table 4.12 TOLL RATES/TRIP (RAJKOT TO JAMNAGAR BYPASS)

Table 4.13 TOLL RATES/TRIP (JAMNAGAR BYPASS TO VADINAR)

DATA ANALYSIS



4.5 FINANCIAL ANALYSIS

After the financial analysis of the four Scenarios, the outcome achieved was as follows:

S. No. Parameters Scenario-1 Scenario-2 Scenario-3 Scenario-4

(All amounts in

Rs. Crore)

Rajkot-

Jamnagar-

Vadinar

Rajkot-

Jamnagar-

Vadinar

with Spur

road

Rajkot to

start of

Jamnagar

Bypass

Jamnagar

Bypass to

Vadinar

1 Total Project Cost 584.2 625.31 349.38 234.82

2 Revenue Generation 448.22 448.22 198.66 249.53

3 Viability Gap 135.98 177.09 160.71 -

4 % of Total Cost 24% 28% 40% -

5 Central Govt 113.32 126.49 - -

6 State Govt 22.66 50.5 - -

Table 4.14 FINANCIAL ANALYSIS

CONCLUSION



5.1 CONCLUSION OF STUDY

o Results of Calculations

From the above calculations, the following was concluded:

The project corridor connecting Rajkot to Vadinar via Jamnagar bypass is a commercially viable

proposition only after the implementation of the Viability Gap Funding Scheme. The project was

initially launched by GIDB in 2002-03 and was not implemented due to the lack of funds. Even today,

the Govt. funding alone is not enough for the project to be feasible. Neither it is still lucrative enough

to be taken for Full fledged BOT project.

The different Scenarios adopted for study are discussed separately below:

• Scenario 1

� Advantages - It appears to be the most financially viable option of all. The Viability Gap

Fund required in this case is only 24%. The project meets the requirements for the Viability

gap Funding Scheme and can be taken as a commercially viable proposition.

� Disadvantages - However, the Spur road, from Rajkot bypass is being neglected here and

it cannot be constructed individually under PPP framework.

CONCLUSION



• Scenario 2

� Advantages - It is also a commercially viable solution and fulfils the requirements for the

Viability Gap Funding Scheme. The fund required in this case is 28%. A major advantage of

this scenario is that it takes care of the Spur road.

� Disadvantages – The Viability Gap Fund is more than the earlier Scenario

• Scenario 3

� Advantages –

� Disadvantage - The Scenario is not commercially viable even after applying the Funding

Scheme. A grant of maximum 40% can be availed for any infrastructure project. Even after

full grant, the project is not becoming economically viable.

• Scenario 4

� Advantages - The project is the most viable solution individually. It does not require any

Funding.

� Disadvantages - However, the whole corridor is not developed as the other portion

becomes financially non viable. The project corridor needs to be developed at the same

time. Only one section getting developed will not result in full traffic realisation.

Therefore, Scenario 2 is the most feasible option for the current project corridor.

FUTURE SCOPE



6.1 FUTURE SCOPE OF STUDY

The Viability Gap Funding Scheme can be applied in almost all Infrastructure sectors.

The Scheme cannot just be limited to Public Private Partnership Projects, but can be adopted by

private organisations also for large scale work like construction of townships.

The Scheme can be applied parallely with the SPV Model also. The Govt. can also earn back the

portion of the money invested.

BIBLIOGRAPHY



References

1. Road & Building Department. Enhancing

Connectivity between DFC, DMIC, Ports and

Indistrial cluster, April 2010.

2. Dept. of Economic Affairs, Ministry of Finance,

Govt. of India. Approach paper on defining Public

Private Partnership, Feb 2010.

3. Secretory for the committee on Infrastructure,

Planning Commission, Govt. of India. Financial

Support to Public Private Partnership in

Infrastructure, 2006


Govt. of India. Position Paper on the Road Sector in

India, July 2009

5. C. R. Bennet and R. R. Allen. Gujarat State

Highway Project Report, lpcb.org

6. CARE Rating, CARE Credit Rating Ltd.

7. Patrick Riley, Infosis. Economic feasibility Analysis,

2004

8. The World Bank, Opening the Rural Hinterlands-

Gujarat State Highway.

9. S. Bhatnagar, eGovernance Advisor, World Bank.

Indian national eGovt plan – focus on service

delivery.

10. Gujarat State Road Development Corporation.

Introduction to PPP.

11. IRC-108:1996. Guidelines for Traffic prediction on

Rural Highways


Govt. of India. Schemes for Support to Public

Private Partnership in Infrastructure, July 2005.

13. Lea Associates Pvt. Ltd. Revalidation Study of

Rajkot-Jamnagar-Vadinar Corridor, 2006

14. Larsen & Toubro – ECC Division. Monthly Progress

Report of Rajkot-Jamnagar-Vadinar road Project.

15. Larsen & Toubro – Rajkot-Jamnagar-Vadinar

Tollways Pvt. Ltd. Concession Agreement, 2006.

16. A. K. Mangotra, Additional Secretory, Dept of

Commerce, New Delhi. Minutes of Empowered

Committee, Export Development Fund for North

East Region.

17. A. K. Jyoti, Chief Secretary, Govt. of Gujarat.

Gujarat, the Global Business Hub.

18. Asian Development Bank. National Highway

Corridor (Sector) I Project.

19. J. O. Ryan, Stanford University. Project Viability

Screening.

20. Industries Commissionerates . Panchmahals

21. P.W.C. Countries Scenario in financing PPP

Projects, Aug 2010.

22. Vibrant Gujarat 2011, Port Led Development,

2011.

23. S. Vasudevan. Public Private Partnerships Today,

2004

24. Secretory. Dept. of Economic Affairs, Ministry of

Finance, Govt. of India. Financial Support to Public

Private Partnership – Recent GoI Initiatives, may

2006.

25. CRISIL Research. Roads and Highways, Aug 2009.

26. GSRDC. Invitations for Proposals - Rajkot-

Jamnagar-Vadinar Road Project on BOT (VGF)

Basis, 2006

27. Asian Development Bank. Republic of Philippines –

Road Sector Improvement Project, Feb 2011.

28. A. K. Chaudhary, IIM Ahmedabad. A Report on

Road Sector in India, 2001.


Govt. of India. Standardization of PPP Contract

provisions in India, Oct 2009.

30. IndiaBudget.nic.in, VGF Guidelines.

31. Pppinindia.com, Current Status of projects under

VFG Scheme.

ANNEXURES


Prithviraj Gohil (2405) Page 52 B. Tech. (Civil Construction), CEPT

University

STRUCTURE COST - SCENARIO 1

Type of Structure Quantity Length/Area Total Length/Area Cost/Unit Total Cost

Major Bridge 2 6048 12096 26000 314496000

Minor Bridge 41 384 15744 24000 377856000

ROB 2 6300 12600 26000 327600000

Box/Slab Culvert 56 192 10752 18000 193536000

Pipe Culvert (Single Row) 148 24 3552 7500 26640000

Annexure – 1 STRUCTURE COST CALCULATION – SCENARIO 1



Major Bridge 3 6240 18720 26000 486720000

Minor Bridge 42 390.48 16400.16 24000 393603840

ROB 2 6300 12600 26000 327600000

Box/Slab Culvert 56 192 10752 18000 193536000





Major Bridge 1 6000 6000 26000 156000000

Minor Bridge 19 384 7296 24000 175104000

ROB 2 6300 12600 26000 327600000

Box/Slab Culvert 22 192 4224 18000 76032000



ANNEXURES



University



Major Bridge 1 6096 6096 26000 158496000

Minor Bridge 22 384 8448 24000 202752000

ROB 0 6300 0 26000 0

Box/Slab Culvert 34 192 6528 18000 117504000



CONSTRUCTION COSTS CALCULATION

Scenario Costs Cost per Km Total Km Total Cost

1

Highway Cost 21731297.71 126 2738143511

Existing Road Maintenance 250229 126 31528854

Intersections, Toll Plaza, Bus

Bay/Bus Shelter 3045038.17 126 383674809.2

2

Highway Cost 21731297.71 131 2846800000

Existing Road Maintenance 250229 131 32779999


Bay/Bus Shelter 3045038.17 131 398900000

3

Highway Cost 21731297.71 75.2 1634193588

Existing Road Maintenance 250229 75.2 18817220.8


Bay/Bus Shelter 3045038.17 75.2 228986870.2

4

Highway Cost 21731297.71 50.8 1103949924

Existing Road Maintenance 250229 50.8 12711633.2


Bay/Bus Shelter 3045038.17 50.8 154687938.9

Annexure – 5 CONSTRUCTION COST CALCULATION

ANNEXURES



University

OVERALL COST CALCULATION OF DIFFERENT SCENARIOS

Scenario Maintenance Km Years/ Cycle Basic Costs p.a. Total Maint. Cost Project Cost Overall Cost

1

Routine Maintenance 126 17.75 40000 89460000

5639100000 5841960000 Periodic Maintenance 126 3 300000 113400000

2

Routine Maintenance 131 17.75 40000 93010000

6042200000 6253110000 Periodic Maintenance 131 3 300000 117900000

3

Routine Maintenance 75.2 17.75 40000 53392000

3372750000 3493822000 Periodic Maintenance 75.2 3 300000 67680000

4

Routine Maintenance 50.8 17.75 40000 36068000

2266400000 2348188000 Periodic Maintenance 50.8 3 300000 45720000

Annexure – 6 FINAL COST CALCULATION