Road Infrastructre - A Legal Perspective

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Conference on Infrastructure Development

Road Sector

A Nation’s Growth Engine

ROAD INFRASTRUCTURE – A LEGAL

PROSPECTIVE

By Ms. Anjuli Sivaramakrishnan

Partner – Transactional & PE Practice

Kochhar & Co.

September 25, 2010

“There are risks and costs to a

program of action. But they are

far less than the long-range risks

and costs of comfortable

inaction”.

John F. Kennedy

35th president of US 1961-1963 (1917 - 1963)

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3

Year Kms.

2003 58112

2004 65569

2005 65569

2006 65569

2007 65569

2008 66754

(Source: Road Transport Yearbook 2006-07, Ministry of Road Transport and Highways, 2009).

ALARMING STATISTICS

The National highway account for only 2-3% of the total

roads but they carry more than 40% of traffic of the

country according to various estimates (NRTP, 2008).

In few states construction of roads of 3 m width, 16 cm

crust thickness with two coats surface dressing is in

practice. As per IRC code these roads are unsuited even

for a single commercial vehicle per day.

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ALARMING STATISTICS

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Scheme for support to PPP on infrastructure

Guidelines for formulation, appraisal and approval of PPP

Guidelines for Invitation of Financial Bids for PPP Projects

Guidelines under Viability Gap Funding scheme

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CENTRAL GUIDELINES ON PPP

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The Andhra Pradesh Infrastructure Development Enabling

Act, 2001

Bihar Infrastructure Development Enabling Act, 2006

Punjab Infrastructure (Development & Regulation) Act, 2002;

PIDB Unsolicited Proposal Bye Laws 2008

SWISS

CHALLENGE

APPROACH6

STATE LEGISLATIONS

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Conceptualization

of Project

Risk Analysis

Financial

Technical

RFQ & RFP

Concession

Agreement

BOT Annuity

BOT Toll

PPP PROCESS

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Framework for evaluating revenue & return

of project is not well developed

No time bound procedures for granting

approvals

No details about the feasibility study have

been enunciated

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CURRENT ISSUES

1. Evaluation of

Returns of

Projects

2. Timelines

3. Feasibility

Study

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Lack of Public participation

No penalties laid out to minimize delays

for the purpose of PPP projects

5. EIA

6. Acquisition

of Land

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CURRENT ISSUES

4. VGF

Guidelines

Complex

Flexible

5. EIA

6. Acquisition

of Land

4. VGF

Guidelines

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PPP PROCESS

Risk CategoryCriticality

Index

Coimbatore

Bypass

Vadodara –

Halol Toll Road

Bharatpur

Bypass

Second

Narmada

Bridge

Delhi-Noida Bridge

FlyoverNardhana ROB

Traffic revenue risk

(other than

demand/market risk)

0.88 30% loss 5-10% loss 25% loss Marginal 5-10% loss 10-15% loss

Delay in land

acquisition 0.83

Minor delay –

No Impact

Marginal

increase in cost4 months delay Nil

1 year delay in

Flyover6 months delay

Demand/market risk 0.8120%

reduction

45-55%

reduction

15-18%

reduction25% reduction 50-55% reduction

20-25%

reduction

Delay in financial

closure0.77

6 months

delay4 months delay 4 months delay 8 months delay Marginal delay Nil

Completion risk 0.77 1 month

Yes–But

completed as

per schedule

through

deployment of

additional

resources

Completed well

ahead of

schedule

Completed well

ahead of

schedule

Completed well

ahead of schedule-

additional resources

deployed

Completed

before schedule

by deployment

of additional

resources

Cost overrun risk 0.74Change in

scope

1.6% of the

project costNo

Marginal

increase

Yes – Marginal

increase

About 7% net

increase in cost

Debt servicing risk 0.74Marginal

impact

Yet to be

realized, but

expected

Yes NoYes –Yet to be

realizedNo

Political risk 0.71 Yes No Yes Not realized yet

Yes – mainly during

developmental

phase

Yes – Marginal

impact

Source: A.V. Thomas 2002

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RECOMMENDATIONS

Comprehensive Feasibility Study

Accountability

Flexibility in VGF

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Legislation to provide for timeframes and

accountability for Breach

Innovative methods of raising Finance

Saving Costs

RECOMMENDATIONS

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