Submitted By Suprav Sarang Praveen Agarwal Sweta Agrawal Sushant Agrawal Isha Bansal Sahil Batra

One of the first State Highway widening projects developed on a Public Private

Partnership basis in Gujrat

Widening and strengthening of 32 kilometres (km) of the existing two-lane State

Highway (SH 87) connecting Vadodara to the industrial town of Halol into a fourlane tolled expressway
The Roads and Buildings Department (R&B), GoG and IL&FS signed a MoA on 31st

Oct,1995
Special purpose vehicle (SPV) constituted for this purpose - Vadodara Halol Toll

Road Company Limited (VHTRL)

VHTRL appointed a contractor through international competitive bidding for the

construction, operation and maintenance of the project

Construction of VHTR commenced on 1st March 1999 and completed on 15th Sep

2000. Toll operations commenced on 24th Oct,2000

VHTRL manages, operates and maintains the road for 30 years starting from 2000

 Developed under the Built, Own, Operate and Transfer (BOOT) basis The SPV, VHTRL promoted by the GoG and IL&FS entered into a

concession agreement with GoG to design, finance, build, operate, maintain, and transfer the facility after recovery of a predetermined return VHTRL appointed a consortium of Punj Lloyd Limited and IRCON International Limited as contractors to construct, operate and maintain the project. The contractors also have an equity stake in VHTRL

Scope of Work
Construction Design and completion of the road - pavement, cross

drainage system, bridges, toll facilities, medians, separators, road furniture, and horticultural aspects

 Toll collection, operating the toll plaza, traffic regulation, maintenance of the facility & special

maintenance activities

Right to charge toll directly to the users of VHTR & earn from advertisements, hoardings and other commercial activities at the project site

Concession period of 30years may be extended to two more years until total cost of project including

20% return is recovered

Development income generated by VHTRL shall be applied towards the recovery of the total cost of

project and the returns

Concessionaire at end of concession period has to transfer and assign to GoG all the Concessionaire's

rights, title deeds, and interest in the facility for a nominal consideration of Re 1
Concessionaire has to deliver to GoG operating manuals, plans, design drawings and other

information to enable it to continue operating the Facility

Current Status
Operational since 2000 Assumptions about incentives for Industrial Development (Long run existence) Incentives gradually withdrawn

Corporate Debt Restructuring in 2004

Deteriorating financial condition

Traffic level did not grow to estimated level

Project Cost = 161 crores of which the construction cost accounted for approximately Rs. 119 crores IL&FS appraised and syndicated the project Equity of Rs. 67.9 crores was raised from Gog, IL&FS, American Insurance Group, and the consortium of contractors IL&FS also raised debt of Rs. 93.2 crores through various Indian financial institutions including IDBI, IDFC, SBI, and other lenders IL&FS itself provided the subordinate debt IL&FS (to the extent of Rs. 10 crore) and IDFC (to the extent of Rs. 20 crore) together provided credit enhancement in the form of an irrevocable take-out option through purchase of Deep Discount Bonds issued by VHTRL

Debt
World Bank & IL&FS Banks Financial Institutions Govt. of Gujarat
Loan Agreement

Govt.of Gujarat
Concession s Agreement

Equity
IL&FS
Shareholding Agreement

Govt. of Gujarat O&M Operator Financial Institutions

VHTRL
O&M Agreement

O&M Operator

Particulars
Project IRR Equity IRR Debt Equity Ratio 20% 32% 58:42

INCEPTION

FEASIBILITY

PROCUREMENT

DEVELOPMENT

DELIVER

EXIT

Need for Private Investment and improving efficiency IL& FS attracted Private investment in infrastructure projects

GOG signed MOA with IL&FS to develop VHTR

technicaleconomic feasibility study

Feasible Project

Investment Recovery

 Concession agreement of VHTRL with GoG to implement the project Agreement

VHTRL appoints a contractor for design, construction, operation and maintenance of Construct the project facilities through bidding

Maintain

VHTRL enters into an Operations & Maintenance Contract with Punj Lloyd Limited and IRCON International Limited

DEVELOPEMENT

31.7 km stretch developed in in a single phase with all the required road works and related facilities

Environmental and Social Impact Assessment and mitigation plan

Introduced bypasses to reduce resettlement and rehabilitation Created pedestrian subways and compound walls provided additional houses for the relocation of communities Planted 550 trees.

Road Work done between 1999 and September 2000. Toll Operations commenced from October 2000. Major items of operation and maintenance: Routine Maintenance (continuous) Periodic Overlay (every five years) Periodic Renewal (every fifteen years) Toll Operation and Management (once a year)

 Concession period- 30 years

Provision of extension by every 2 years till the time the

Concessionaire is able to gain a return of 20% on investment.

RISK TYPE Delays in land acquisition Delays in obtaining permits

SENSITIVITY High

RISK TAKER Government

COMMENTS Acquisition a condition precedent in agreement, non fulfillment gives concessionaire right to terminate agreement Govt. will facilitate but PDs responsibility to obtain

High

Private developer

Design Risk

High

PD Contractor needs to adhere to (transferred to performance nd tech stndrds. contractor) Will have to bear additional costs if any due to rectification.
PD Borne by concessionaire but (transferred to transferred to contractor due to contractor) fixed price nature of project.

Inflation

Medium

RISK TYPE

SENSITIVITY

RISK TAKER PD/ Govt.

COMMENTS Additional revenue streams at discretion of govt. Can extend the concession period in tranches of two years. Incremental revenue

Revenue/ Low Demand Risk

Construction High Risk

PD To be accomplished within 18 (transferred to moths. Cost due to delay to be contractor) absorbed by contractor. PD Capital cost risk with PD. Beyond control insulated by increase in concession period.

Financial Risk

High

Force Majeure

Low

PD

Comprehensive insurance coverage and a temporary toll review provision to mitigate

 A Value for Money Analysis has been presented here which

highlights the benefits of involving the private sector in the development process. A qualitative approach has been adopted, given the lack of data:
One of the objectives of undertaking the project was to change

the traditional paradigm of executing infrastructure projects only through contractual arrangement. This was one of the first projects being executed through a public private partnership .The project resulted in capacity building of the state government machinery and also created a platform for private developers to participate in infrastructure building in the country.

 One of the objectives of utilizing a PPP framework for

infrastructure projects is to bring in efficient execution of project . VHTR completed within the stipulated time and budgeted .The project was completed well within the 18 months and in Rs. 175 crores. The actual landed cost of the project was Rs. 160 crores. Thus the project has resulted in both cost and time savings. VHTR is one of the first projects in the road sector to have contractually binding terms for development of an environmental and social management plan. As detailed earlier, the development of required infrastructure factored in the social and environmental impact that was likely and mitigated the same through an effective mechanism

 Pre-development market assessment is critical

Competitive bidding can ensure a better deal

Need to create a balanced risk return profile Conflicts of interest should be identified early and

avoided Innovative financing mechanisms Environmentally and Socially responsive development framework