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OVERVIEW

SIZE
 

  • India has an extensive road network of 3.3 million km – the second largest in the world
     

  • Roads carry about 70% of the freight and 85% of the passenger traffic
     

  • Highways/Expressways constitute about 66,000 km (2% of all roads) and carry 40% of the road traffic
     

  • The Government of India spends about $4 billion p.a. on road development
     

  • The ambitious National Highway Development Project (NHDP) of the Government is at an advanced stage of implementation. Key sub-projects under the NHDP include:

    • The Golden Quadrilateral (GQ-5846 km of 4 lane highways)

    • North-South & East-West Corridors (NSEW-7300 km of 4 lane highways)
       

  • Program for 4-laning of about 14,000 km of National Highways is underway

      


Road development is a
priority sector


India has the second largest network in the world


An annual growth of 12-15%
for passenger traffic
has been projected

STRUCTURE

  • The National Highways Authority of India (NHAI) is the apex Government body for implementing the NHDP – all contracts whether for construction or BOT are awarded through competitive bidding
     

  • Private sector participation is increasing, and is through:

    • Construction contracts

    • BOT for some stretches – based on either the lowest annuity or the lowest lumpsum payment from the Government

      • * BOT contracts permit tolling on those stretches of the NHDP

POLICY

  • 100% FDI under the automatic route is permitted for all road development projects
     

  • Incentives:

    • 100% income tax exemption for a period of 10 years

    • NHAI agreeable to provide grants/viability gap funding for marginal projects

    • Model concession agreements formulated

The Golden Quadrilateral and NSEW projects

OP

  


OPPORTUNITY

OUTLOOK

  • Annual growth projected at 12-15% for passenger traffic, and 15-18% for cargo traffic
     

  • Over $50–60 billion investment is required over the next 5 years to improve road infrastructure

POTENTIAL

  • Road development is recognised as essential to sustain India’s economic growth

    • The Government is planning to increase spends on road development substantially with funding already in place based on a cess on fuel
       

  • A large component of highways is to be developed through public-private partnerships

    • Several high traffic stretches already awarded to private companies on a BOT basis

    • Two successful BOT models are in place – the annuity model and the upfront/lumpsum payment model
       

  • Investment opportunities exist in a range of projects being tendered by NHAI for implementing the NHDP – contracts are for construction or BOT basis depending on the section being tendered.
     

  • A $5 billion project plans to lay 6 lane roads over 6,500 km of National Highways on the Design Build Finance and Operate (DBFO) basis – for high traffic stretches of over 40,000 passenger car units (PCUs) per day.

For additional information: Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways (http://morth.nic.in), National Highways Authority of India (http://www.nhai.org)
 

 Content Source: www.investmentcommission.in
 
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