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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) B.Tech (Civil Construction), CEPT University
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) B.Tech (Civil Construction), CEPT University
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
4.3 TOTAL CONSTRUCTION COST – SCENARIO 2 37
4.4 TOTAL PROJECT COST – SCENARIO 2 37
4.5 TOTAL CONSTRUCTION COST – SCENARIO 3 38
4.6 TOTAL PROJECT COST – SCENARIO 3 39
4.7 TOTAL CONSTRUCTION COST – SCENARIO 4 40
4.8 TOTAL PROJECT COST – SCENARIO 4 40
4.9 ANNUAL TRAFFIC FORCAST (RAJKOT TO JAMNAGAR BYPASS) 43
4.10 ANNUAL TRAFFIC FORCAST (JAMNAGAR BYPASS TO VADINAR) 43
ABSTRACT
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) B.Tech (Civil Construction), CEPT University
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
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
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Prithviraj Gohil (2405) Page 2 B.Tech (Civil Construction), CEPT University
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
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Prithviraj Gohil (2405) Page 3 B.Tech (Civil Construction), CEPT University
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 4 B.Tech (Civil Construction), CEPT University
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 5 B.Tech (Civil Construction), CEPT University
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.
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Prithviraj Gohil (2405) Page 6 B.Tech (Civil Construction), CEPT University
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.
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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
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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.
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• 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.
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Prithviraj Gohil (2405) Page 10 B. Tech (Civil Construction), CEPT University
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
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Prithviraj Gohil (2405)
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
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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 essential features of a PPP.
EXISTING SCENARIO OF PPP PROJECTS IN VARIOUS SECTORS IN INDIA
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 implemented i.e. developed, financed, constructed, maintained and
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
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%
Public Private Partnership Projects in various
Sectors
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
B. Tech (Civil Construction), CEPT University
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 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
In order to be eligible for funding under this Scheme, a PPP project shall meet the following criteria:
implemented i.e. developed, financed, constructed, maintained and
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
ay projects that are not amenable to operation by a Private Sector Company, the
aterways
Public Private Partnership Projects in various
Airports
Education
Energy
Ports
Railways
Roads
Tourism
Urban Development
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� 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
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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.
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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
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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
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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.
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• 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.
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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.
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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
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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
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3.4 LOCATION MAP
Fig 3.2 LOCATION MAP OF CASE STUDY
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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:
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Table 3.2 AVERAGE DAILY TRAFFIC VOLUME (ADT IN VEHICLES)
Table 3.3 ANNUAL AVERAGE DAILY TRAFFIC VOLUME (AADT IN VEHICLES AND PSUs)
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Table 3.4 TRAFFIC COMPOSITION
Table 3.5 PEAK HOUR SHARE OF TRAFFIC
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Table 3.6 TRAFFIC VOLUME - SALIENT FEATURES
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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
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University
Fig 3.3 RAJKOT-JAMNAGAR-VADINAR PESSANGER DESIRE LINE
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University
Fig 3.4 RAJKOT-JAMNAGAR-VADINAR FREIGHT TRAFFIC DESIRE LINE
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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:
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Table 3.9 UNIT RATES OF STRUCTURES
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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
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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)
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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
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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.
S. No. Description of Item Total Amount (in Crore Rs.)
1 Highway Cost 273.82
2 Intersections, Toll Plaza, Bus Bay/Bus Shelter 38.37
3 Structure Cost 124.02
4 Existing Road Maintenance 3.15
Total 439.36
Table 4.1 TOTAL CONSTRUCTION COST – SCENARIO 1
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• Total Project Cost
S. No. Type of Cost Total Amount (in Crore Rs.)
1 Civil Construction Cost 439.36
2 Contingency (10%) 43.95
3 Construction Supervision (3%) 14.5
4 Inflation During Constriction (15%) 66.12
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.
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• 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.
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 4.3 TOTAL CONSTRUCTION COST – SCENARIO 2
• 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 4.4 TOTAL PROJECT COST – SCENARIO 2
• 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. 604.22 Crore)
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� 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. * 131 Km * 17.75 Years = Rs. 9,30,10,000
� Periodic Maintenance Cost (Rs. 3,00,000 every 5 Years)
– No. of maintenance Cycles = 3
– Therefore the Cost is = Rs. 3,00,000 * 131 Km* 3 Cycles = Rs. 11,79,00,000
Therefore total Cost in Scenario 1 = Rs. 625.31 Crore
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.
• 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.
S. No. Description of Item Total Amount (in Crore Rs.)
1 Highway Cost 163.42
2 Intersections, Toll Plaza, Bus Bay/Bus Shelter 22.9
3 Structure Cost 74.58
4 Existing Road Maintenance 1.88
Total 262.78
Table 4.5 TOTAL CONSTRUCTION COST – SCENARIO 3
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• Total Project Cost
S. No. Type of Cost Total Amount (in Crore Rs.)
1 Civil Construction Cost 262.78
2 Contingency (10%) 26.28
3 Construction Supervision (3%) 7.88
4 Inflation During Constriction (15%) 39.42
Total 337.28
Table 4.6 TOTAL PROJECT COST – SCENARIO 3
• 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. 337.28 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. * 75.2 Km * 17.75 Years = Rs. 5,34,00,000
� Periodic Maintenance Cost (Rs. 3,00,000 every 5 Years)
– No. of maintenance Cycles = 3
– Therefore the Cost is = Rs. 3,00,000 * 75.2 Km* 3 Cycles = Rs. 6,77,00,000
Therefore total Cost in Scenario 1 = Rs. 349.38 Crore
DATA ANALYSIS
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 40 B. Tech (Civil Construction), CEPT University
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.
• 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.
S. No. Description of Item Total Amount (in Crore Rs.)
1 Highway Cost 110.39
2 Intersections, Toll Plaza, Bus Bay/Bus Shelter 15.47
3 Structure Cost 49.44
4 Existing Road Maintenance 1.27
Total 176.58
Table 4.7 TOTAL CONSTRUCTION COST – SCENARIO 4
• Total Project Cost
S. No. Type of Cost Total Amount (in Crore Rs.)
1 Civil Construction Cost 176.58
2 Contingency (10%) 17.66
3 Construction Supervision (3%) 5.3
4 Inflation During Constriction (15%) 26.49
Total 226.64
Table 4.8 TOTAL PROJECT COST – SCENARIO 4
• 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)
DATA ANALYSIS
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 41 B. Tech (Civil Construction), CEPT University
� 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. 226.64 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. * 50.8 Km * 17.75 Years = Rs. 3,60,68,000
� Periodic Maintenance Cost (Rs. 3,00,000 every 5 Years)
– No. of maintenance Cycles = 3
– Therefore the Cost is = Rs. 3,00,000 * 50.8 Km* 3 Cycles = Rs. 4,57,20,000
Therefore total Cost in Scenario 1 = Rs. 234.82 Crore
DATA ANALYSIS
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405)
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
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
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
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, 2-3 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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 43 B. Tech (Civil Construction), CEPT University
Table 4.9 ANNUAL TRAFFIC FORCAST (RAJKOT TO JAMNAGAR BYPASS)
Table 4.10 ANNUAL TRAFFIC FORCAST (JAMNAGAR BYPASS TO VADINAR)
DATA ANALYSIS
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 44 B. Tech (Civil Construction), CEPT University
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 45 B. Tech (Civil Construction), CEPT University
Table 4.12 TOLL RATES/TRIP (RAJKOT TO JAMNAGAR BYPASS)
Table 4.13 TOLL RATES/TRIP (JAMNAGAR BYPASS TO VADINAR)
DATA ANALYSIS
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 46 B. Tech (Civil Construction), CEPT University
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 48 B. Tech (Civil Construction), CEPT University
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 49 B. Tech (Civil Construction), CEPT University
• 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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 50 B. Tech (Civil Construction), CEPT University
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 51 B.Tech (Civil Construction), CEPT University
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
4. Dept. of Economic Affairs, Ministry of Finance,
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
12. Dept. of Economic Affairs, Ministry of Finance,
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.
29. Dept. of Economic Affairs, Ministry of Finance,
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
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
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
STRUCTURE COST - SCENARIO 2
Type of Structure Quantity Length/Area Total Length/Area Cost/Unit Total Cost
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
Pipe Culvert (Single Row) 152 24 3648 7500 27360000
Annexure – 2 STRUCTURE COST CALCULATION – SCENARIO 2
STRUCTURE COST - SCENARIO 3
Type of Structure Quantity Length/Area Total Length/Area Cost/Unit Total Cost
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
Pipe Culvert (Single Row) 62 24 1488 7500 11160000
Annexure – 3 STRUCTURE COST CALCULATION – SCENARIO 3
ANNEXURES
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 53 B. Tech. (Civil Construction), CEPT
University
STRUCTURE COST - SCENARIO 4
Type of Structure Quantity Length/Area Total Length/Area Cost/Unit Total Cost
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
Pipe Culvert (Single Row) 86 24 2064 7500 15480000
Annexure – 4 STRUCTURE COST CALCULATION – SCENARIO 4
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
Intersections, Toll Plaza, Bus
Bay/Bus Shelter 3045038.17 131 398900000
3
Highway Cost 21731297.71 75.2 1634193588
Existing Road Maintenance 250229 75.2 18817220.8
Intersections, Toll Plaza, Bus
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
Intersections, Toll Plaza, Bus
Bay/Bus Shelter 3045038.17 50.8 154687938.9
Annexure – 5 CONSTRUCTION COST CALCULATION
ANNEXURES
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
Prithviraj Gohil (2405) Page 54 B. Tech. (Civil Construction), CEPT
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