Nhai

Government of India
Ministry of Shipping, Road Transport and Highways
Guidelines for Investment in

Road Sector
Not just roads... building a NATION

Index
Executive Summary 4
Current Scenario 5
Financing National Highway

Projects 7
Public Private Partnership in

Highway Development 10
Revenue Risks and Mitigation 26
Overview of Successful Projects 29
Work Plan-II (2010-11) 31
Policy Framework 35
Foreign Direct Investment Policy 37
Tax Environment 39
Repatriation of Investments
and Profits Earned in India 45
Administrative Framework 47
About NHAI 49
Annexure 51
KPMG in India
for
National Highways Authority of India
The information contained herein is of a general nature and is not intended to

address the circumstances of any particular individual or entity. Although we
endeavor to provided accurate and timely information, there can be no
guarantee that such information is accurate as of the date it is received or that
it will continue to be accurate in the future. No one should act on such
information without appropriate professional advice after a thorough
examination of the particular situation.
4 Guidelines for Investment in Road Sector
Executive Summary
The National Highway network of the country spans provided the single largest opportunity for private
about 70,548 km. The National Highway Development financing and management of infrastructure services.
Project (NHDP), covering a length of about 55,000 km
of highways, is India's largest road development Build Operate Transfer (BOT) concession contracts
programme in its history. In many ways, this ambitious with an estimated value of USD 9.2 billion (including
and path-breaking initiative of the Government of BOT/DBFOT2-Toll and BOT-Annuity contracts) have
India, which began in the last decade acknowledged been awarded under various packages till date
the importance of private sector in India's and these projects are expected to be fully operational
infrastructure development. by 2015-16.
The consistent policy and institutional framework, With several key projects on the anvil (including
which has been the backbone of the INR 3,00,000 6- laning of 4-laned roads, expressways and
Crore (USD 60 billion1) NHDP, also conveys the intent port connectivity projects) and the increasing
and commitment of successive governments interest evinced by domestic and foreign players in the
to encourage increased private sector participation sector, NHAI is happy to present to you, the Guidelines
in developing the arterial road network of the country for Investment in the Road Sector, with specific focus
to world class standards. More than 60 percent of the on NHDP.
estimated investment requirement is expected to be
privately financed. NHAI believes that this document would serve as a
useful guide for potential investors, developers and
The early success of Public-Private-Partnerships (PPP) stakeholders interested in participating in India's
in the NHDP, arguably, set the tone for similar ambitious highway development programme.
initiatives in other infrastructure sectors and has
1. INR 50 = 1 USD : figures approximated

2. Design Build Finance Operate & Transfer
(DBFOT)
Guidelines for Investment in Road Sector 5
Current Scenario
India has an extensive road network of 3.3 million km – project IRR is expected to be around 14-16% and
the second largest in the world. The National equity IRR around 18-20%3.
Highways have a total length of 70,548 km and serve
as the arterial road network of the country. It is The NHDP is being implemented under several
estimated that more than 70 per cent of freight and 85 phases:
per cent of passenger traffic in the country is being
handled by roads. While Highways/ Expressways 4-laning of the Golden Quadrilateral (GQ) and North-
constitute only about 2 per cent of the length of all South and East- West (NS-EW) Corridors-(NHDP I & II)
roads, they carry about 40 per cent of the road traffic
leading to a strain on their capacity. The number of Phase I mainly involves widening (to 4 lanes) and
vehicles on roads has been growing at compounded upgrading of 7,498 km of the national highway
annual growth rate (CAGR) of over 8% in the last 5 network and has four component packages:
years (2003-04 to 2008-09).
1. Highway network linking the four metropolitan
The development of National Highways is the cities in India i.e. Delhi-Mumbai-Chennai-Kolkata,
responsibility of the Government of India. The covering a length of 5,846 km, popularly known
Government of India has launched major initiatives to as the Golden Quadrilateral (GQ) project.
upgrade and strengthen National Highways through 2. Highways along the North-South (NS) and East-
various phases of the NHDP. NHDP is one of the West (EW) corridors, covering a length of 981 km
largest road development programmes to be 3. Port connectivity projects covering a length
undertaken by a single authority in the world and of 356 km; and
involves widening, upgrading and rehabilitation of 4. Other highway projects, covering a length of 315
about 55,000 km, entailing an estimated investment km
of INR 3,00,000 Crore (USD 60 billion).
Phase-II involves widening and improvement of the
The National Highways Authority of India (NHAI) is NS-EW corridors (not covered under Phase-I) covering
mandated to implement the National Highways a distance of 6,647 km, besides providing connectivity
Development Project (NHDP). Most of the projects to major ports on the east and west coasts of India and
have been developed or are under development on some other projects. This includes 6,161 km of NS-EW
Public Private Partnership (PPP) basis through Build corridors and 486 km of other highways. The total
Operate and Transfer (BOT)-Annuity and BOT-Toll length of the NS-EW network under Phases I & II is
mode (these have been explained in detail in later about 7,200 km.
section of the brochure). Typically, in an annuity
project, the project IRR is expected to be 12-14% and 4-laning of the GQ has almost been completed. Phase
equity IRR would be 14 -16%. For toll projects, where II is expected to be largely completed by December
the concessionaire assumes the traffic risk, the 2010.
3. CRISIL Research
Upgradation of 12,109 km (NHDP-III) projects has already commenced and the entire
NHDP-III involves upgradation of 12,109 km (mainly 4- package is expected to be completed by 2012. Of the
laning) of high density national highways, through the 6,500 km proposed under NHDP-V, about 5,700 km
Build, Operate & Transfer (BOT) mode at a cost of INR would be taken up in the GQ and the balance 800 km
80,626 Crore (USD 16.1 billion). would be selected on the basis of predefined eligibility
criteria.
The project consists of stretches of National
Highways carrying high volume of traffic, connecting Development of 1,000 km of expressways (NHDP-VI)
state capitals with the NHDP network under Phases I With the growing importance of urban centres of
and II and providing connectivity to places of India, particularly those located within a few hundred
economic, commercial and tourist importance. kilometers of each other, expressways would be both
viable and beneficial. The Government has approved
2-laning of 20,000 km with paved shoulders (NHDP-IV) 1,000 km of expressways to be developed on a BOT
basis, at an indicative cost of INR 16,680 Crore (USD
With a view to providing balanced and equitable
3.3 billion). These expressways would be constructed
distribution of the improved/widened highways
on new alignments.
network throughout the country, NHDP-IV envisages
upgrading of 20,000 km of such highways into 2-lane
highways, at an indicative cost of INR 27,800 Crore Other Highway Projects of 700 km (NHDP-VII)
(USD 5.6 billion). This will ensure that their capacity, The development of ring roads, bypasses, grade
speed and safety match minimum benchmarks for separators and service roads are considered
national highways. The government has already necessary for full utilisation of highway capacity as
approved strengthening of 5,000 km to 2-lane paved well as for enhanced safety and efficiency. For this, a
shoulders on BOT (Toll/ Annuity) under NHDP-IV A at a programme for development of such features at an
cost of INR 6,950 Crore (USD 1.4 billion). indicative cost of INR 16,680 Crore has been approved
by the Government. Apart from the high density
6-laning of 6,500 km (NHDP-V) corridors, a substantial part of the National Highways
network would also require development during the
Under NHDP-V, 6-laning of the 4-lane highways
11th Plan period. These sections are characterised by
comprising the GQ and certain other high density
low density of traffic. Some of these stretches fall in
stretches, will be implemented on BOT basis at an
backward and inaccessible areas and others are
estimated cost of INR 41,210 Crore (USD 8.2 billion).
of strategic importance. The development of these
These corridors have been 4-laned as part of the GQ in
categories of National Highways would be carried out
Phase-I of NHDP. Implementation of initial set of
primarily through budgetary resources.
Current Status of NHDP4

50000 48829
40000
35000
30000
25549
25000
20000
15000 14250
10000 9030
5000
0
Completed Work in Progress To be Awarded Total
4. As on 30th April, 2010.

Financing National Highway Projects
Traditionally, financing for development of National are expected to be repaid through the toll income from
Highways in India was from the budgetary resources the project. The interest rate for the project is
of the Government of India. In order to augment the determined according to ADB's pool based variable
available resources, loans have also been raised from lending rate system for US dollar loans. Around 80 per
multilateral agencies like World Bank, Asian cent of the external assistance is provided to NHAI as
Development Bank (ADB) and Japan Bank of a grant by the Central government. The balance is
International Cooperation (JBIC). made available as long-term loans to NHAI, with the
Centre bearing the foreign exchange risk. Such loans
NHAI has earlier received loans directly from are usually provided for 15-25 years with a moratorium
multilateral agencies (highway project). These loans of 5 years.
Summary of Externally Aided Projects
Awarded Awarded Completed

Category
No. of Contracts Length in km Cost (INR Crore) No. of Contracts Length in km
World Bank Funded Projects
NHDP Phase I 18 983 5538 14 699

GQ 18 983 5538 14 699
Others - - - - -
NHDP Phase II EW Corridors 12 482 3208 - -
Sub-Total A 30 1465 8746 14 699

ADB Funded Projects
NHDP Phase I 13 766 2374 10 615

GQ 12 718 2315 9 567
Others 1 48 59 1 48
NHDP Phase II NS & EW Corridors 31 1636 7565 14 848
Sub-Total B 44 2402 9939 24 1463
JBIC Funded Projects
NHDP Phase I 7 150 634 7 150

GQ 5 111 333 5 111
Others 2 39 301 2 39
Sub-Total C 7 150 634 7 150
Grand Total (A+B+C) 81 4017 19319 45 2312
Presently, the development and maintenance of (Annuity) - Investment by private firm and
National Highways is financed by following modes: return through semi-annual payments from
1. Government's general budgetary sources NHAI as per bid.
• Special Purpose Vehicle – SPV (with equity
2. Dedicated accruals under the Central Road Fund participation by NHAI)
(by levy of cess on fuel) • Market Borrowings
3. Lending by international institutions:
• World Bank NHAI also has a provision for providing grant upto 40%
• ADB of the project cost to make projects commercially
• JBIC viable. However, the quantum of grant is decided on a
4. Private financing under PPP frameworks case to case basis and typically constitutes the bid
• Build Operate and Transfer/Design Build parameter in BOT projects generally not viable based
Finance Operate and Transfer5 (DBFOT) - on toll revenues alone. The disbursement of such
Investment by private firm and return through grant is subject to provisions of the project concession
levy and retention of user fee agreements (please refer CD for provisions in the
• Build Operate and Transfer (Annuity) - BOT Model Concession Agreement).
Approved Financing Plan of NHDP (as on 31st March, 2009)
Phase Particulars Projected For (Kms) INR Crore
Cess and Market Borrowings 18,846

NHDP-I External Assistance 7862
BOT/SPV 3592
Total (At 1999 Prices) 7498 30300
Cess and Market Borrowings 23420
NHDP-II External Assistance 7609
BOT/SPV 3310
Total (At 2002 Prices) 6647 34339
Budgetary Support 12809
NHDP-III Cess and Market Borrowings 17688
BOT/SPV 50129
Total (At 2004 Prices) 12109 80626
Private Sector 4608
NHDP-IV A
Government Spending 2342
Total (At 2006 Prices) 5000 6950
NHDP-V
BOT/SPV 35691
Total (At 2006 Prices) 6500 41210
NHDP-VI
BOT/SPV 9000
Total (At 2006 Prices) 1000 16680
NHDP-VII
BOT/SPV 10378
Total (At 2007 Prices) 700 16680
5. The developer has flexibility in project design so long as the build and service quality is in line with
prescribed standards set out in the Standards and Specification Manuals.
NHAI projects, with higher traffic volumes, have also been bid out on the basis of Negative Grant (upfront
payment payable by successful bidder to NHAI). However, under the revised MCA, projects under BOT/
DBFOT framework have also been awarded on a revenue share basis, where the bidder offering the highest
revenue share (subject to technical qualification) is awarded the project.
Projects awarded on Negative Grant

Estimated Estimated
Grant Grant
Road Section Length (Km.) Cost Cost
(INR Crore) (USD Million)
Delhi-Gurgaon 28 710 142 61 12
Rajkot Bypass-Jetpur 36 388 77 59 12
Panipat elevated Highways 10 270 54 96 19
Salem- Karur 42 253 51 46 9
Krishnagiri - Thopurghat 62 372 74 140 28
Tindivanam-Ulundurpet 71 480 96 152 30
Thirssur-Angamali 40 312 62 84 17
Jalandhar- Amritsar 49 263 60 7 1
Ambala-Zirakpur 36 298 60 106 21
Dhule-Pimpalgaon 118 556 111 59 12
Vadodara Bharuch 83 660 132 471 94
Bharuch-Surat 65 492 118 504 101
Projects awarded on Revenue Share Basis

Estimated Estimated
Road Section Length (Km.) Cost Cost Revenue Share (%)
Surat-Dahisar 239 2600 619 38%
Gurgaon-Jaipur 225 1900 452 48%
Panipat-Jalandhar 291 2200 523 20%
Chennai-Tada 42 317 76 17%
Vijayawada-Chilkaluripet 85 1173 280 2%

Public Private Partnership in

Highway Development
Public Private Partnerships (PPP) are going to be the semi-annually by NHAI to the concessionaire and
main mode of delivery for future phases of NHDP. linked to performance covenants. The concessionaire
While there are a number of forms of PPP, the does not bear the traffic/ tolling risk in these contracts.
common forms that are popular in India and have been
used for development of National Highways are: Operate, Maintain and Transfer (OMT) Concession
NHAI has recently taken up award of select highway
• Build, Operate and Transfer (Toll) Model projects to private sector players under an OMT
• Build, Operate and Transfer (Annuity) Model Concession. Till recently, the tasks of toll collection
• Special Purpose Vehicle (SPV) for Port and highway maintenance were entrusted with tolling
Connectivity Projects agents/ operators and subcontractors, respectively.
These tasks have been integrated under the OMT
NHAI is also proposing to award projects under a long concession. Under the concession private operators
term Operations, Maintenance and Transfer (OMT) would be eligible to collect tolls on these stretches for
concession. maintaining highways and providing essential
services (such as emergency/ safety services).
BOT (Toll)
Private developers/ operators, who invest in tollable Special Purpose Vehicle for Port Connectivity
highway projects, are entitled to collect and retain toll Projects
revenues for the tenure of the project concession NHAI has also taken up development of port
period. The tolls are prescribed by NHAI on a per connectivity projects by setting up Special Purpose
vehicle per km basis for different types of vehicles.The Vehicles (SPVs) wherein NHAI contributes upto 30%
Government in the year 1995 passed the necessary of the project cost as equity.The SPVs also have equity
legislation on collection of toll. (Refer the National participation by port trusts, State Governments or their
Highways Fee [Determination of Rates and Collection] representative entities. The SPVs also raise loans for
Rules 2008). financing the projects. SPVs are authorised to collect
user fee on the developed stretches to cover
A Model Concession Agreement (MCA) has been repayment of debts and for meeting the costs of
developed to facilitate speedy award of contracts.This operations and maintenance.
framework has been successfully used for award of
BOT concessions.The MCA has been revised recently International Competitive Bidding Process
and current projects are being awarded under the General procedure for selection of concessionaires
revised MCA (refer enclosed CD for overview of MCA adopted by NHAI is a two-stage bidding process.
framework). Projects are awarded as per the model documents-
Request for Qualification (RFQ), Request for Proposal
BOT (Annuity) (RFP) and Concession Agreement - provided by the
The concessionaire bids for annuity payments from Ministry of Finance. NHAI amends the model
NHAI that would cover his cost (construction, documents based on project specific requirements.
operations and maintenance) and an expected return (Please refer CD for these model documents). The
on the investment. The bidder quoting the lowest processes involved in both stages are set out as
annuity is awarded the project. The annuities are paid follows:
Stage 1: Pre-qualification on the basis of Technical and project would be executed only by such EPC
Financial expertise of the firm and its track record in Contractors who have completed atleast a single
similar projects which meets the threshold technical highway project of more than 20% of the
and financial criteria set out in the RFQ Document. estimated project cost of the project or INR 500
Crore (USD 100 million) which ever is less in the
Some of the recent significant amendments in the pre preceding 5 financial years from the application
qualification document are set out below: due date.
1. Determination of technical and financial capacity of Notice inviting tenders is posted on the web site and
consortium applicants in proportion to the published in leading newspapers
committed equity holding of each consortium
member in the project SPV. For illustration- Stage 2: Commercial bids from pre-qualified bidders
are invited through issue of RFP. Generally, the
- If Company A has been assessed to have an duration between Stage 1 and 2 is about 30-45 days.
experience score (measured in terms of Wide publicity is given to NHAI tenders so as to attract
payments made/received and/or revenues attention of leading contractors/ developers/
received for eligible projects) of 5000 and consultants.
Company B has been assessed to have an
experience score of 2500, in a Consortium with The Government has put in place appropriate policy,
shareholding of A as 60% and B as 40%, then institutional and regulatory mechanisms including
the weighted experience score of the a set of fiscal and financial incentives to
Consortium shall be: encourage increased private sector participation in
5000*60%+2500* 40%=800 road sector.
- If Company A with a net worth of INR 1000
Summary of recent policy changes in the project
Crore (USD 200 million) & Company B with a
development and award process are set out
net worth of INR 500 Crore (USD 100 million)
below:
are bidding together as a Consortium with
shareholding of A as 60% and B as 40% then
1. All applicants meeting the threshold technical and
the weighted financial score of the Consortium
financial experience criteria set out in the RFQ shall
shall be:
be eligible to participate in the RFP stage. Earlier
1000*60%+500*40%= INR 800 Crore (USD
only the top 5-6 applicants shortlisted based on
160 million)
qualification criteria were eligible to submit
financial bids for projects.
2. In case of foreign companies, a certificate from a
qualified external auditor who audits the books of
2. NHAI is empowered to accept single bids based on
accounts of the Applicant or the Consortium
assessment of reasonableness of the bids.
Member in the formats provided in the country
where the project has been executed shall be
3. Overall cap on Viability Gap Funding (VGF)
accepted, provided it contains all the information
increased from 5% to 10% for the entire six-laning
as required in the prescribed format of the RFQ.
programme (5080 km).
3. Applicants/Bidders would need to provide an
4. For individual projects with low traffic in the Golden
undertaking to NHAI that the EPC works of the
Quadrilateral (GQ) corridors, VGF cap has been
increased upto 20% of the project cost with an estimated project cost of the subject project
overall cap of 500 km of roads in the project earlier.
network.
e. The threshold technical experience score for
5. Equity Support under VGF has been increased to the purpose of prequalification will be equal to
40% of project cost. Earlier, 20% of project cost the estimated project cost of the earlier subject
was provided as equity support in construction project. This was, earlier equal to twice the
phase and 20% as Operations & Maintenance estimated project cost of the subject project.
Support
f. Where the projects are bid out on a revenue
6. Modifications in Standard RFQ, RFP and share basis, the base premium (fixed amount)
Concession Agreement structures for National (revenue share proposed by the successful
Highway Projects bidder) will be increased at the rate of 5 per cent
year on year with respect to the immediately
a. Termination provisions under capacity preceeding year for the entire tenure of the
augmentation situations modified to give more concession.
comfort to investors and lenders. The
concession period can be extended upto 5 The aforesaid changes6 are expected to further
years to yield a post tax equity IRR of 16%, in incentivise private investment in road/highway
the event of capacity augmentation option projects.
exercised by the concessionaire.
Opportunities for Private Investors/ Developers
b. Exit option allowed for principal promoters of More than 60% of the projected investment
road SPVs after two years from commercial requirement for the NHDP (USD 60 billion) is expected
operations date (COD). Promoters were earlier to be privately financed, primarily through the
required to hold a minimum of 26% of the BOT/DBFOT (Toll) route, offering enormous
SPV’s shareholding at all times during the opportunities. With a large number of new projects on
tenure of the Concession. offer under PPP in the road sector, there exists several
investment opportunities for investors and companies
c. Threshold limit for common control with diverse business lines such as engineering
(shareholding) of entities in competing companies, civil work contractors, O&M contractors,
Applicants and/ or their Associates for the toll operators, construction equipment manufacturers
purposes of determining Conflict of interest, etc. and other stakeholders such as advisors,
raised from 5% to 25%. Any such conflict of financiers and sector professionals. Only about 15 per
interest arising at the prequalification stage cent of the total highways in India are 4-laned and the
shall be deemed to subsist at the bidding stage sheer potential for investments in this sector is likely
only if such applicants attracting the conflict of to create opportunities in the core construction
interest provisions submit their bids. industry which may also be attractive for foreign
players.
d. Threshold technical capability for claiming
eligible project experience has been reduced to The opportunity for private players in the road sector
a range between 5-10% of estimated project can be broadly categorised in two segments:
cost of the subject project in lieu of 10-20% of a) Infrastructure Development
6. As per recommendations of B K Chaturvedi Committee

Risk Framework of Model Concession Agreement

Roads
The MCA has been developed in consultation with all
stakeholders based on internationally accepted
Development
Construction Tolling
Urban
Trucking Tourism
principles and best practices. Throughout, it seeks to
Projects Transportation
achieve reasonable balance of risks and rewards for all
BOT/ Pvt Bus Luxury
the participants.
Equipment Services Perishables
DBFOT - Toll Service Buses
BOT -
Material Equipment As an underlying principle, risks have been allocated to
Annuity Containers
the parties that are best suited to manage them.
OMT
Technology
Bulk
Project risks have, therefore, been assigned to
SPV the private sector to the extent it is capable of
Maintenance managing them. The transfer of such risks and
responsibilities to the private sector would increase
Logistics & Services
the scope of innovation leading to efficiencies in cost
and services.
Infrastructure Development
The commercial and technical risks relating to

construction, operation and maintenance are
Model Concession Agreement (MCA) for PPP
allocated to the concessionaire, as it is best suited to
Projects
manage them. Other commercial risks, such as the
The highways sector in India has witnessed significant
rate of growth of traffic, are also allocated to the
investment in recent years. For sustaining the interest
concessionaire.
of private participants, a clear risk-sharing and
regulatory framework has been spelt out in the Model
Key Concessionaire Risk/Obligations
Concession Agreement (MCA). The MCA has been
developed to facilitate speedy award of contracts. This • Construction Risk - The concessionaire is required
framework has been successfully used for award of to commence construction works when the
BOT concessions. The MCA has been revised and financial close is achieved or earlier date that the
current projects are being awarded under the parties may determine by mutual consent. The
revised MCA. This framework addresses the issues, concessionaire shall not be entitled to seek
which are typically important for PPP, such as compensation for any prior commencement and
unbundling of risks and rewards, symmetry of shall do it solely at his own risk.
obligations between the principal parties, equitable • O & M Risk - Concessionaire to operate and
sharing of costs and obligations, and risk mitigation maintain the project facility (includes road and
options under various scenarios including force road infrastructure as specified in the concession
majeure and termination, under transparent and fair agreement). Failure to repair and rectify any defect
procedures. or deficiency within specified period shall be
considered as breach of responsibility.
With the introduction of the MCA, the risks involved in
• Financial Risk - The concessionaire shall at its cost,
project and contractual issues, hitherto, have been
expenses and risk make such financing
assuaged, and the entire process from invitation to bid
arrangement as would be necessary to finance
to implementation of the project is transparent.
the cost of the project and to meet project
MCA's risk framework is briefly discussed below:
requirements and other obligations under the
agreement, in a timely manner.
• Traffic Risk - The MCA provides for increase or Key Common Risk
decrease of the concession period in the event the • Force Majeure Risk - Force Majeure shall mean
actual traffic falls short or exceeds the target occurrence in India of any or all of Non-Political
traffic. NHAI stipulates the target traffic during the Event(s), Indirect Political Event(s) and Political
year specified in project specific concession Event(s), which include the following:
agreement, which is usually around the 10th year
from the date of signing of the agreement. The Non-Political Event:
target traffic is determined based on 5% • act of God, epidemic, extremely adverse
Compounded Annual Growth Rate (CAGR) over weather conditions or radioactive contamination
the base year traffic for the project. MCA also or ionising radiation, fire or explosion;
provides for termination of the agreement if the • strikes or boycotts
average daily traffic in any accounting year • the discovery of geological conditions, toxic
exceeds the design capacity and continues to contamination or archaeological remains on the
exceed for three subsequent accounting years. Site; or
Termination payments under this scenario will be • any event or circumstances of a nature
commensurate to those applicable under an analogous to any of the foregoing.
Indirect Political Event (See table in next section on
page 26). Indirect Political Event
• an act of war, invasion, armed conflict or act of
An overview of revenue risks and mitigation foreign enemy, blockade, embargo, riot,
(including Termination Payment) under the MCA is insurrection, terrorist or military action,
provided in the next section. • civil commotion or politically motivated
sabotage which prevents collection of toll/
Key NHAI Risk/Obligations fees,
• Land Acquisition Risk: NHAI is responsible for • industry-wide or state-wide or India-wide
acquiring the requisite land for the project highway strikes or industrial action which prevent
collection of toll/ fees,
• Approvals: NHAI will provide all reasonable
• any public agitation which prevents collection
support and assistance to the concessionaire in
of toll/ fees
procuring applicable permits required from any
Government Instrumentality.
Political Event
• Change in Law,
• compulsory acquisition by any governmental
agency of any project assets or rights of
concessionaire or of the Contractors; or
• unlawful or unauthorised or without jurisdiction
revocation of or refusal to renew or grant
without valid cause any consent or approval
required by developer
Salient features of the MCA

• Substantial part of the project site free from
encumbrances would be handed over to the
concessionaire till the Appointed Date. Additional
land in case of change of scope will need to be
acquired by concessionaire on behalf of the
Authority.
• Additional tollway will not be commissioned
within a specified year, depending upon the
concession period. Minimum user fee for
additional tollway will be at least 25% higher than
the toll fee on project. Any alternate road,
exceeding 20% of the length of the project
highway, shall not be considered as an additional
tollway.
• The concessionaire will be entitled to nullify any
change of scope order if it causes the cumulative
cost relating to all change of scope orders to
exceed 5% of the Total Project Cost (TPC) in any
continuous period of 3 years immediately
preceding the date of such Change of Scope
order, or if such cumulative cost exceeds 20% of
the TPC at any time during the concession period.
• Financial close is to be achieved within 180 days
from date of agreement. NHAI may allow
additional period for financial close on a project
specific basis.
• Grant (upto 40% of TPC) to the concessionaire by
way of equity support and operations &
maintenance support in quarterly installments.
(B.K.Chaturvedi Committee has recommended
that the entire grant [upto 40% of TPC] can be
provided as equity support).
• Concessionaire to pay nominal fee of INR 1 (USD changed by mutual consent of the parties. Each party
0.02) per annum throughout the concession is free to nominate its arbitrator who in turn, will
period. appoint a presiding arbitrator. The Arbitration Tribunal
• There is an optional provision for capacity so constituted can adjudicate any dispute referred to
augmentation of existing 4-laning to 6-laning. If it, and any other question of law arising out of such
capacity augmentation is not done within the dispute, including its own jurisdiction. The award
specified period, the concession period gets passed by such Tribunal, has the sanctity of a 'Decree'
reduced to the number of years specified in the under Indian Law and can be challenged on very
project specific agreement. The option to excuse limited counts.
from 6-laning of the Project Highway is available
with both the concessionaire and the Authority Dispute Resolution Procedure for projects under
before the pre-specified 6-laning date in the BOT and Consultancy
concession agreement. • Mediation by the Independent Engineer: If any
dispute arises between the parties, it is in the first
Implementation steps of Project place resolved by the mediation of the
• Completion of preparatory works for the identified Independent Engineer. Any dispute, which is not
projects resolved by mediation of the Independent
• Finalisation of Bidding Documents Engineer, is resolved by amicable resolution.
• Invitation of Bids
• Pre bid Conference • Amicable Resolution: Any dispute, difference or
• Evaluation of Bids controversy of whatever nature between the
• Award of Concession parties, arising under, out of or in relation to the
• Signing of the Agreement Project Concession Agreement (PCA) is
attempted to be resolved amicably in accordance
Dispute Resolution with the procedure set forth in the dispute
Any dispute arising out of or in relation to the resolution mechanism. Either party may require
concession agreement, between the parties is such dispute to be referred to the Chairman, NHAI
required to be resolved as per the Dispute Resolution and the Chief Executive Officer of the
Procedure (see below) prescribed in the Agreement. It concessionaire in the interim, for amicable
specifies that the parties should attempt to resolve the settlement. Upon such reference, the two shall
dispute amicably and for this purpose, the mandate meet at the earliest mutual convenience and in any
has been given to an Independent Engineer to event not later than 15 days of such reference to
mediate and assist the parties to arrive at a discuss and attempt to amicably resolve the
settlement. The procedure has been laid out in dispute. If the dispute is not amicably settled
sufficient detail therein. within 15 (fifteen) days of such meeting between
the two, either party may refer the dispute to
However, upon the failure of such conciliatory arbitration in accordance with the provisions of the
measure, the parties shall resort to Arbitration, which PCA.
shall be held in accordance with Arbitration and
Conciliation Act, 1996 (based on United Nations • Arbitration: Any dispute, which is not resolved
Commission on International Trade Laws - UNCITRAL amicably, shall be finally settled by binding
model). The seat of arbitration for all concession arbitration under The Arbitration Act. The
agreements pertaining to National Highways shall arbitration shall be carried out by a panel of three
ordinarily be at Delhi, however, the place may be arbitrators, one to be appointed by each party and
the third to be appointed by the two arbitrators agreed between the parties under the tender
appointed by the parties. The party requiring documents. The provisions of the Contract Act and
arbitration shall appoint an arbitrator in writing, other legal provisions, covering the intricate
inform the other party about such appointment commercial aspects of the dispute are looked into
and call upon the other party to appoint its very minutely before passing any order. The Courts
arbitrator. If within 15 days of receipt of such have, however, been very cautious in passing any
intimation the other party fails to appoint its injunctive relief in disputes arising out of tender
arbitrator, the party seeking appointment of process and pays due regard to the fairness in the
arbitrator may take further steps in accordance process of issuing tender and selection of bidders,
with the Arbitration Act. stage of infrastructure development and stakes
(public money) involved. Where complex financial
The Dispute Resolution Procedure for EPC issues are involved, the Courts also seek advice of an
Projects does not involve amicable settlement. expert committee and consider various factors like
The disputes are referred to the Dispute Review price index, quality of work, past performance of
Board. parties, market reputation, etc. The decision in each
case may however differ, depending upon facts of
• Dispute Review Board: The Board shall comprise each case.
of three members, experienced with the type of
construction involved in road works, and with the OMT Concessions
interpretation of contractual documents. If, during • The OMT concession would be for a maximum
the contract period, either of the parties is of the period of 9 years
opinion that the Dispute Review Board is not • The private sector will be selected on the basis of a
performing its functions properly, they may competitive bidding process. The successful
together disband the Board and reconstitute it. bidder would be the one offering the highest
concession fee to NHAI7
• Dispute involving Foreign Contractor(s): In the • The concessionaire is allowed a period of 45 days
case of a dispute with a foreign contractor, the from the date of signing of the concession
dispute shall be settled in accordance with the agreement to commence commercial operations
provisions of the UNCITRAL Arbitration Rules. The • The OMT concessionaire will pay a fixed
arbitral tribunal shall consist of three arbitrators, concession fee to NHAI every month and
one each to be appointed by the employer and the undertake tasks of toll collection and mobilisation
contractor and the third arbitrator chosen by the of funds for improvement, operation and
two arbitrators so appointed by the parties, who maintenance of highways
shall further act as the Presiding Arbitrator.
NHAI has identified eight highway sections which are
A “Foreign Contractor” means a contractor who is expected to be completed in the next 6 months to be
not registered in India and is not a juridical person awarded on OMT basis. The concession
under Indian Law. agreements for two highway sections have been
signed and the pre-qualification of bidders for the
General Trends in Dispute Resolution remaining six sections is under process. More
The Courts in India have been very neutral in sections, where project completion is anticipated in
construing the documents, in the cases arising out of the next 6-12 months, are being planned for OMT
tender processes and rely upon terms and conditions concessions.
7. The bidder offering the maximum amount of first year concession fee or minimum
amount of first year quarter O&M support (in case no bidder offers the concession fee).
Opportunities for Investment-State-Wise Projects Under NHDP Phase II
Estimated Project Cost

Length
S. No. Stretch NH
(Km)
STATE: Assam
1 Udarband to Harangajo 54 31 202 40
STATE: Jammu & Kashmir
1 Two Tunnels on Udhampur-Banihal- 1A 19 5000 1000

Srinagar Section
STATE: Kerala
1 Walayar-Vadakkancherry 47 55 600 120
STATE: Punjab
1 Jallandhar-Amritsar 1 20 190 36
STATE: Tamil Nadu
1 Salem-Coimbatore Kerala 47 82 540 108

Border Section
STATE: Uttar Pardesh
1 Agra Bypass Km176-800 of NH-2 to 23 33 345 69

Km 13.03.0 of NH-3
Opportunities for Investment-State-Wise Projects Under NHDP Phase III-A

Length
S. No. Stretch NH
(Km)
STATE: Andhra Pradesh
1 Vijaywada-Machhlipatnam 9 65 424 85
STATE: Bihar
1 Patna-Bakhtiarpur 30 53 346 69
STATE: Haryana
1 Rohtak-Hissar 10 80 522 104
STATE: Karnataka
1 Mulbagal-Kamataka/AP Border 4 11 72 14
2 Balgaum-Goa/KNT Border 4A 84 548 110
3 Mangalore-KNT/Kerala Border 17 18 117 23
STATE: Kerala
1 Ottira-Thiruvananthapuram 47 123 805 161
2 Trivendrum-Kerala/Tamil Nadu Border 47 43 280 56
3 Kerala/Tamil Nadu Border Kanyakumari 47 70 456 91


Length
S. No. Stretch NH
(Km)
STATE: Maharashtra
1 Nagpur-Wainganga Br 6 60 391 78
STATE: Orissa
1 Chandikhole-Duburi 200 39 254 51
2 Panikoili-Roxy 215 249 1623 325
3 Duburi-Talcher 200 98 639 128
STATE: Punjab
1 Chandigarh-Kurali 21 30 195 39
2 Parwanoo-Shimla (Punjab, 22 110 717 143

Haryana and HP)
STATE: Rajasthan
1 Reengus-Sikar 11 41 267 53
2 Deoli-Jhalawar 12 178 1161 232
STATE: Tamil Nadu
1 Nagapatnam-Thanjavur 67 74 482 96
2 Krishnagiri-Tindivaram 66 170 1108 222
STATE: West Bengal
1 Barasat-Bangaon 35 60 391 78
Opportunities for Investment-State-Wise Projects Under NHDP Phase III-B

Length
S. No. Stretch NH
(Km)
STATE: Arunachal Pradesh
1 Itanagar-Arunachal Pradesh/ 52A 22 143 29

Assam Border
STATE: Assam
1 Doboka-Assam/Nagaland 36 124 808 162

Border-Dimapur
2 Baihata Chariali-Banderdewa 52 314 2047 409
3 Badardewa-Assam/ 52A 9 59 12
Arunachal Pradesh Border
4 Assam/Meghalaya Border to Assam/ 44 116 756 151

Tripura Boder
5 Silchar-Assam/Mizoram Border 54 50 326 65
STATE: Bihar
1 Muzaffarpur-Sonbasra 77 89 580 116
2 Motihari-Raxaul 28A 67 437 87
3 Bakhtiarpur-Begusarai-Khagarai-Purnea 31 255 1663 333
4 Forbesganj-Jogwani 57A 13 85 17
5 Patna-Buxar 84 130 848 170
STATE: Chhatisgarh
1 Kumud-Dhamtari 43 23 150 30
2 Raipur-Simga 200 28 183 37


Length
S. No. Stretch NH
(Km)
STATE: Gujarat
1 Jetpur-Somnath 8D 127 828 166
2 Gujarat/Maharashtra Border-Surat 6 84 548 110
3 Gujarat/MP Border-Ahmedabad 59 210 1369 274
STATE: Jammu & Kashmir
1 Srinagar-Baramula-Uri 1A 101 659 132
STATE: Kerala
1 KNT/Kerala Border-Khozikode-Eddapally 17 451 2941 588
STATE: Maharashtra
1 Kalamboli-Mumbra (6 Laning) 4 20 130 26
2 Panvel-Indapur 17 84 548 110
STATE: Madhya Pradesh
1 Bhopal-Rajmarg Crossing-Jabalpur 12 297 1936 387
2 Obaiduliaganj-Bheembetka 69 13 85 17
3 Jhansi-Khajuraho 75 100 652 130
STATE: Manipur
1 Nagaland/Manipur Border-Imphal 39 140 913 183
STATE: Mizoram
1 Assam/Mizoram Border-Aizawi 54 113 737 147


Length
S. No. Stretch NH
(Km)
STATE: Meghalya
1 Shillong (excluding Shillong Bypass)- 44 136 887 177

Assam / Meghalaya Border
STATE: Nagaland
1 Kohima-Nagaland-Manipur Border 39 28 183 37
STATE: Punjab
1 Amritsar 15 101 659 132
STATE: Rajasthan
1 Beawar-Pali-Pindwara 14 246 1604 321
STATE: Tripura
1 Tripura/Assam Border to Agartala 44 195 1271 254
STATE: Tamil Nadu
1 Madurai-Ramnathpuram- 49 186 1213 243
Rameshwaram-Dhanushodi
2 Coimbatore-Mettupalayam 67(Ext.) 45 293 59
3 Theni-Kumili 220 57 372 74

Opportunities for Investment-State-Wise Projects Under NHDP Phase V

Length
S. No. Stretch NH
(Km)
STATE: Andhra Pradesh
1 Chilkaluripet-Vijayawada-Elluru- 5 270 1712 342

Rajamundri
2 Tada-Neliore Bypass 5 130 824 165
3 Vishakapatnam-Ankapalli-Rajamundri 5 200 1268 254
4 Srikakulam-Vishakhapatnam Ankapalli 5 100 634 127
5 Icchapuram-Srikakulam 5 140 888 178
STATE: Bihar
1 Aurangabad-Barwa Adda 2 70 444 89
STATE: Gujarat
1 Ahmedabad-Vadodara Expressway NE-1 95 602 120
2 Udaipur-Ahmedabad 8 140 888 178
STATE: Jharkhand
1 Barwa Adda-Panagarh 2 100 634 127
2 Aurangabad-Barwa Adda 2 150 951 190


Length
S. No. Stretch NH
(Km)
STATE: Karnataka
1 Bangalore-Tumkur 4 65 412 82
2 Hubli-Chitradurga 4 200 1268 254
3 Bangalore-Krishnagiri 7 55 349 70
4 Belgaum-Hubli 4 110 697 139
5 Kagal-Belgaum 4 77 488 98
STATE: Maharashtra
1 Satara-Kagal-Belgaum 4 133 843 169

Revenue Risks and Mitigation
Revenue realisation in BOT-Toll projects is subject to The concession agreement provides for extension or
some key risks including, but not limited to variation in reduction of the concession period in the event the
traffic, variation in toll rates, additional tollway, actual traffic falls short or exceeds the target traffic9, as
occurrence of premature termination on account of estimated on the target date10.
certain events. The concession agreement provides
for various risk mitigation mechanisms to the MCA also provides for termination of the agreement if
concessionaire including change in concession period, the average daily traffic in any accounting year
differential toll rates that are linked to cost of different exceeds the design capacity and continues to exceed
road structures under the new toll rules (linear for three subsequent accounting years. Termination in
alignment, bridges, tunnels, bypasses etc.) to such scenario will be deemed to happen on account of
providing for termination payments under force an Indirect Political Event.
majeure events.
Variation inToll rates (Linked to WPI)
Variation in Traffic The notification of the New National Highways Fee
Rules (2008) has provided for a revision of toll rates
Change in Cap on Concession
Type of Variation and hence realisable toll revenues for all vehicle
Concession Period Period Variation
For every 1%
categories. The new toll rules are applicable for all new
Actual Traffic <
shortfall,concession 20% road projects.
Target Traffic
period increase by 1.5%
For every 1% excess,
Actual Traffic >
concession period 10%
Target Traffic
reduction by 0.75%8
8. Waiver from concession period reduction can be obtained on payment of premium

9. The method for calculating Actual Traffic and Target Traffic is detailed in the MCA
10. Target Date is around 10 years from the date of the agreement in a 20 year concession period
The salient features of the new toll rules are: (without bypasses and bridges) of 100 km has been
• Increase in base toll rates by 3% every year considered. In Scenario 2, the highway stretch
• Increase in toll charges to the extent of 40% of the includes a linear alignment of 80 km and bypass length
increase in WPI. of 20 km. The increase in WPI is assumed to be 5%
• Toll charges for new structures (bridges, p.a.
tunnels)/alignments (bypass, alternate section)
determined based on construction cost. The table above shows that for a given base toll rate,
• Rounding off fee to the nearest five rupees (earlier the toll charges determined by the new toll rules are
rounded off to nearest 1 Rupee). higher. The toll charges are significantly higher in
Scenario 2, where higher construction cost of the
While the earlier tolling rules prescribed a standard bypass is reflected in the toll charges.
base toll rate on a per passenger car unit (pcu)/km
basis for a highway project, the new rules prescribe Complete details of the new National Highway Fee
base toll rates also for high-cost structures (such as (Determination of Rates and Collection) Rules, 2008
bridges, bypass or tunnels) separately. The base toll are provided in the enclosed CD.
rates for such high-cost structures are indexed to the
estimated project cost (on INR/vehicle/trip basis). EarlyTermination of Concession
The concession may be terminated before project
Provided below is an illustration of toll revenues completion in the event of the following:
earned from a Light Motor vehicle and Multi Axle
Vehicle (MAV of three to six axles) as per the • NHAI Event of Default: In the event of any of the
applicable toll rates under the old and new toll rules defaults specified in the concession agreement
respectively. which the Authority has failed to cure within 90
days or such longer period as has been specified in
The toll charge at the end of fifth year has been the agreement, the Authority shall be deemed to
calculated under two project development scenarios. be in default and concessionaire shall have the
In Scenario 1, a linearly aligned highway stretch right to terminate the agreement
During construction
Old Toll Rate New Toll Rates11 Event of
(after financial During operations
Rs./ trip (USD) Rs./ trip (USD) Default
closure)
Scenario 1 Concessionaire No payment Payment equal to 90% of debt

event of default due less insurance claims if any.
Light Motor Vehicle Light 79 80
Commercial Vehicle (~1.57) (~1.6) NHAI event of a. the total Debt Due
default b. 150% of the Adjusted Equity.12
128 130
(~2.5) (~2.6) Force Majeure
Scenario 2 Non-Political Payment equal 90%

Event of the Debt Due less Insurance Cover
Light Motor Vehicle Light 79 120
Commercial Vehicle (~1.57) (~2.4) Indirect Political a. Debt Due Less Insurance Cover
Event13 b. 110% of the Adjusted Equity
128 185 a. the total Debt Due

(~2.5) (~3.7) Political Event
b. 150% of the Adjusted Equity
11. As per new tolling rules, toll rate revision is determined by the formula - TR1 = TR0(1+3%) + TR0((1+3%)*%Variation in WPI*40%)
12. Adjusted equity is equity funded in Indian Rupees adjusted suitably to reflect change in value of equity on account of depreciation and variations in WPI
at different periods during the Concession Period
13. Including termination due to breach of capacity as set out under traffic risk
• Concessionaire Event of Default: In the event of proportionate change in the concession period to
any of the defaults specified in the concession compensate the concessionaire for losses during
agreement which the concessionaire has failed to such period
cure within the specified cure period, and where
no such cure period has been specified, then The concession is eligible to be terminated (by
within the cure period of 60 days, the either party) if the force majeure event subsists for
concessionaire shall be deemed to be in default at least 180 days within a continuous period of 365
and NHAI shall have the right to terminate the days.
agreement
Termination payments are made by NHAI to the
• Force Majeure Event: A force majeure event which concessionaire in the event of termination due to
lasts for less than 180 days will lead to a above mentioned reasons.
Overview of
Successful Projects
PPP is gradually proving to be a successful The project was completed 5 months ahead of its
mechanism for developing and maintaining the s ch e d u l e d c o m p l e t i o n d a t e ( 2 0 0 5 ) . T h e
National Highways, as is evident from the increased concessionaire also earned a bonus of INR 42.25
private sector participation in projects till date. Crore (USD 8.5 million) in the form of early tolling
during the period before scheduled completion date.
Cost in Even today, the concessionaire is earning more
Number of Contracts
INR Crore USD Billion revenues than those projected at the time of bidding.
BOT Toll However, the excess revenue is being shared
Awarded 121 9927 85884 18
Completed 34 1834 12479 2.5 between the concessionaire and NHAI as per the
BOT DBFO revenue sharing clause in the agreement.
Awarded 8 1034 7785 1.6
Completed
BOT Annuity Belgaum – Maharashtra Border Section of NH-4
Awarded 38 2269 21712 4.3
Completed 13 804 4608 0.92 (Annuity Project)
Source: NHAI
The project involved widening of existing two lanes to
Toll collection depends on two factors - traffic volume 4-lane divided carriageway facility including the
and tolling rate. The toll rates are pre-specified by rehabilitation of existing 2-lanes on annuity basis. The
NHAI. Estimates of traffic growth for projects are also estimated cost of this 78 km long road project is INR
provided by NHAI based on detailed feasibility studies. 332 Crore (USD 66.4 million; NHAI Estimate). The
However, bidders are advised to carry out section has two toll plazas.
independent due-diligence of the traffic and growth
estimates. The profitability of tolled National Highways The project was awarded to the consortium of
has made the sector extremely competitive and M/s ILFS, M/s Punj Lloyd Ltd. and M/s Consolidated
attractive. In light of the forecasts for traffic growth on Toll Network India Ltd. The concession period is 17
important road corridors, the Government has given years and 6 months. The concessionaire completed
first preference to Build-Operate Transfer (BOT/ the project in October 2004, two months earlier than
DBFOT) toll projects. the stipulated project completion date, and was paid a
(performance) bonus of INR 42.16 Crore (USD 8.4
Jaipur- Kishangarh BOT Project –NH 8 million) on account of early completion.
Jaipur-Kishangarh is one of the earliest projects
implemented on BOT framework. The project involved Second Vivekananda Bridge (now Sister Nivedita
4-laning a length of approximately 91 km from Jaipur Bridge)- BOT Project in Kolkota:
to Kishangarh (NH-8), in the state of Rajasthan at an This bridge is one of the first BOT projects, undertaken
estimated cost of INR 644 Crore (USD 129 million- by NHAI in 1995. The concession agreement was
NHAI estimate). NHAI provided a grant of INR 211 signed in September, 2002.The consortium members
Crore (USD 42 million) to the project. The concession are from USA, U.K, Mauritius and India. Though the
period of the project is 20 years. financial close was delayed by one year, the
construction thereafter was almost on time and the Foreign companies are executing 27 contracts
bridge was commissioned on 4th July, 2007. This exclusively and 81 contracts as joint venture partners
bridge also won the award of excellence for the year with Indian companies. Foreign investors are allowed
2007 under the Foreign Bridge Project Category from 100 per cent foreign direct investment in road sector
the American Segmental Bridge Institute. NHAI had (Please refer section on page 37). The total value of
provided a grant of INR 120 Crore (USD 24 million) out contracts with foreign participation is estimated to be
of the total project cost of INR 640 Crore (USD 128 more than INR 12,000 Crore (USD 2.4 billion)
million). The concession period of the project is 30
years.
Construction No. of No. of Length
Firms Foreign Firms Projects (in km)
Jawaharlal Nehru Port Connectivity Project in
Maharashtra BOT (Toll) 26 26 2874
This project has been undertaken as part of a
BOT (Annuity) 8 8 645
programme for adequate road connectivity to major
ports through an SPV of NHAI (Jawaharlal Nehru Port 68 68 3347
EPC Contracts
Road Company Limited). Phase-1 of the project, with a
length of 30 km for 4-laning of NH-4/4B, built at an
estimated cost of INR 177 Crore (USD 35.4 million)
was commenced in February 2002 and was Country wise breakup of Foreign and JV
completed in July 2005. This project is a symbolic Companies involved in development work of
representation of a successful venture of NHAI, National Highway Projects
Jawaharlal Nehru Port and State Government
represented by City and Industrial Development Contractors
S. No. Country
Corporation of Maharashtra Ltd. (CIDCO). Phase-II of JV Independent
the project for 4-laning of 14 km and the 6-laning of 1. China 11 2

Panvel Creek Bridge (length: 397m) at a cost of INR 2. Dubai 3 0
143 Crore (USD 29 million) has been taken up and 3. Malaysia 25 10
likely to be completed soon. Encouraged by the
4. Iran 1 0
results, Phase –III at a cost of INR 279 Crore (USD 56
million), is also being taken up. The concession given 5. Singapore 1 0
to the SPV of NHAI is for 20 years from December 6. Saudi Arabia 1 0
2000. The SPV made profits (after tax) of INR 16.4 7. UK 4 0
Crore (USD 3.3 million), INR 20.3 Crore (USD 4 million)
8. Indonesia 2 2
& INR 21.7 Crore (USD 4.3 million) in 2005-06, 2006 -
07 & 2007-08 respectively. 9. Korea 9 5
10. Spain 6 0
Participation of Foreign Contractors 11. Taiwan 1 4
Foreign contractors started participating in NHDP
12. Thailand 3 1
contracts (and to a limited extent in state highway
projects) from 2000-01. In 2000-01, there were about 13. Turkey 2 0
20 contracts in the NHDP, where foreign contractors 14. Philippines 1 0
participated either on their own or in joint ventures; the 15. USA 1 1
number grew to about 32 in 2003. The foreign
16. Russia 8 2
contractors taking part were from Malaysia, Korea,
China, Russia, Turkey, Indonesia, Iran and some niche 17. Italy 2 0
contractors from Europe for specialised jobs. It is Total 81 27
presently estimated that about a dozen foreign road
contractors are operating in India.
Work Plan-II (2010-11)

S. No. State Section NH No. Length km
NHDP
1 Meghalay Jowai-Meghalaya/Assam Border 44 104
Sub-Total 104
2 Punjab Ludhiana - Talwandi 95 78
Sub-Total 78
3 Rajasthan Kota-Jhalwar 12 55
Sub-Total 55
4 Uttarakhand Rampur-Kathgodam 87 88
Sub-Total 88
5 West Bengal Barasat-Petrapole 35 60
Sub-Total 60
Total NHDP III 307
NHDP Phase-V
6 Andhra Pradesh Vijayawada-Elluru-Rajamundry 5 198
7 Andhra Pradesh Ichapuram-Srikakulam-Vishakapatnam-Rajahmundri 5 436
Sub-Total 634
8 Karnataka Dharwad-Haveri 4 95
9 Karnataka Khangal-Belgam 4 77
Sub-Total 172
10 Orissa Chandikhole-Paradeep 5A 80
Sub-Total 80
11 Punjab Ludhiana-Chandigarh 95 & 21 85
Sub-Total 85
12 Uttar Pradesh Agra-Etawah Bypass 3 125
13 Uttar Pradesh Allahabad Bypass-Varanasi 2 160
14 Uttar Pradesh Aurangabad-Barwa Adda 2 220
15 Uttar Pradesh Etawah-Chakeri 2 157
16 Uttar Pradesh Chakeri-Allahabad 2 153
Sub-Total 815
NHDP Phase-IV 1786
NHDP Phase-IV
17 Bihar NMuzaffarpur-Barauni 28 107
18 Bihar Chhapra-Rewaghat-Muzzaffarpur 102 75

Sub-Total 182
19 Chattisgarh Arang-Saraipalli-Orissa Border 6 150


20 Chattisgarh Chilpi-Simga 12A 128
21 Chattisgarh Raipur to Dhamtari 43 72
22 Chattisgarh Dharmtari-Jagdalpur 43 222
23 Chattisgarh/Jharkhand Pathalgaon to Gumala 78 130
24 Chattisgarh Ambikapur to Pathlgaon 78 85
25 Chattisgarh Bilaspur-Ambikapur 111 190
26 Chattisgarh Raipur-Bilaspur 200 112
Sub total 1089
27 Himachal Pradesh Bilaspur to Ner Chowk 21 54
28 Himachal Pradesh Ner Chowk to Manali 21 119
Sub total 173
29 Jharkhand Junction with Govindpur at
NH-2-Dhanbad-Bokaro-Ramgarh 32 & 33 130
30 Jharkhand Junction with NH-2 at Govindpur-Chas-Upto
JHR/WB Border 32 71
31 Jharkhand/West Bengal Jamshedpur-Kharagpur 6 & 33 150
Sub total 351
32 Karnataka Hospet-Chitradurga 13 119
33 Karnataka Bellary-Gooty 63 77
34 Karnataka Hospet-Hubli-Ankola 63 271
35 Karnataka Hoskote to Dobespet 207 89
36 Karnataka Jozhikode (Kerala Border)-Gundlupet-Coimbatore 212 & 67
(Kerala Border) 63
37 Karnataka Gulbarga-Bijapur-Homnabad 218 200
Sub total 819
38 Madhya Pradesh Gwalior-Dewas 3 450
39 Madhya Pradesh Jabalpur-Kakhnadon 7 74
40 Madhya Pradesh Biaora-MP/Rajasthan Border 12 Ext. 66
41 Madhya Pradesh Jabalpur-Mandla-Chilpi 12A 189
42 Madhya Pradesh Obadullaganj-Betul 69 143
43 Madhya Pradesh Jabalpur-Katani-Rewa 7 210
Sub total 1308

44 Maharashtra Amravati-Dhule-Gujrat Border 6 450
45 Maharashtra Khed-Nasik 50 180
46 Maharashtra Vedishi-Osmanabad-Solapur 211 85
47 Maharashtra Dhule-Aurangabad 211 140
48 Maharashtra/ Solapur-Sangareddy 9 234
Andhra Pradesh Sub Total 1089
49 Orissa Baleshwar-Baripada-Jharpokhria
(Jn. of NH-5 with NH-6) 5 90
50 Orissa Jn. with NH-6 at Sambalpur with NH-5 in Cuttack 42 261
51 Orissa Bahargora-Sambalpur 6 370
52 Orissa Birmitrapur-Palhara 23 128
Sub Total 849
53 Punjab Sri Ganganagar-Amritsar 15 172
54 Punjab/Haryana Jalandar-Jind 71 350
Sub Total 522
55 Rajasthan/Gujarat Padhi-Dahod 113 123
56 Rajasthan/ Jhalawar-Biaora 12 121
Madhya Pradesh Sub Total 244
57 Tamil Nadu Thanjavur-Pudukkotai-Sivaganga-Manamadurai 226 122
58 Tamil Nadu Tiruchirapalli-Lalgudi-Chidambaram &
Meenusuriti-Jayamkondam-Kootu Road
[km 90.00 to km 93.00 (Common stretch with 45C
km 96.80 to km 99.60 of NH 227)} & 227 135
59 Tamil Nadu Vikravandi-Kumbakonam-Thanjavur 45C 165
Sub Total 422
60 Uttar Pradesh Nepal Boarder-Varanasi 233 292
61 Uttar Pradesh Varanasi-Lucknow 56 300
62 Uttar Pradesh Varanasi-Hanumanha 7 70
63 Uttar Pradesh Lucknow-Rai Bareilly 24 B 82
64 Uttar Pradesh Unnao-Lalganj 232 A 68
65 Uttar Pradesh Morababad-Aligarh 93 71
66 Uttar Pradesh Meerut-Nazibabad 119 139
67 Uttar Pradesh Meerut-Bulandshahar 235 66
68 Uttar Pradesh / Rajasthan Bharatpur-Mathura-Hathras SH 90

69 Uttar Pradesh Rai Bareilly-Jaunpur 231 169
70 Uttar Pradesh Ambedkar Nagar-Banda 231 287
71 Uttar Pradesh Barabanki-Bahraich-Nanapara-Rupaidiha 28 C 152
72 Uttar Pradesh Gorakhpur-Ferenda-Nautanwa-Sonauli 29 E 99
Sub Total 1885
73 Uttarakhand/ Chutmapur-Saharanpur-Yamunanagar-Haryana/
Uttar Pradesh UP Border 73 50
74 Uttarakhand Dehradun-Chutmalpur-Roorkee 72 A 70
75 Uttarakhand Sitarganj-Tanakpur 125 52
76 Uttarakhand/ Haridwar-Kashipur 74 167
77 Uttar Pradesh Sub Total 339
78 West Bengal Pundlbari-Baxirhat 31 46
79 West Bengal JHR/WB Border-Purliya-Balarampur-JHR/WB
border-upto junction with NH-33 at Chandil
(Jharkhand) 32 82.5
Sub Total 128.5
Total Phase IV 9224.5
SARDP-NE
80 Assam Demow-Dibrugarh 37 64
81 Assam Numaligarh-Jorhat 37 56
82 Assam Jorhat-Demow 37 81
Sub Total 201
83 Nagaland Dimapur-Kohima 39 81
Sub Total 81
Total SARDP-NE 282
Grand Total 11599.5
Policy Framework
National Highways Policy Initiatives Viability Gap Funding Scheme ( VGF)

The government has adopted a road development The VGF scheme provides financial support in the
policy setting out the guidelines for investment in form of capital grant for PPP projects in various
highways. In order to meet the huge investment infrastructure sectors. VGF Scheme is intended to
requirements in the sector, the government has taken support projects which are commercially unviable but
a number of measures to attract private sector have high economic benefit.
participation.
The Empowered Institution sanctions projects for VGF
• The government has permitted 100 per cent upto INR100 crore (USD 20 million) for each eligible
foreign equity in construction and maintenance of project subject to the budgetary ceiling indicated by
roads, highways, tunnels etc. the Finance Ministry. The Empowered Institution also
• Grant upto 40% of project cost to make project considers other proposals and places them before the
viable. Empowered Committee. Funding upto 20% of the
• 100% tax exemption in any 10 consecutive years project cost is provided. If required, an additional 20%
within a period of 20 years after completion of the can be made available by the sponsoring
project. Ministry/agency.
• Agreements to avoid double taxation with a large
number of countries Proposals up to INR 200 Crore (USD 40 million) will be
• Concession period upto 30 years sanctioned by the Empowered Committee and
• Right to charge tolls on certain (toll) projects. amounts exceeding INR 200 Crore will be sanctioned
These tolls are indexed to a formula linked with by the Empowered Committee with the approval of
the wholesale price index. Finance Minister.
• The government permits duty free import of high
capacity equipment required for highway Capital grant for all infrastructure projects under the
construction. VGF scheme is restricted to a maximum of 40% of the
• Government support for land acquisition, project cost (for projects upwards of INR 200 Crore).
resettlement and rehabilitation.
• Simplified procedure for Land Acquisition Grant provided by NHAI for highway projects under
• MCA for BOT (Annuity) and OMT are being the BOT route may be financed through the VGF route.
finalised. VGF funding will not be available over and above
• New rules for collection of fee for use of sections of NHAI's grant for projects.
national highway, permanent bridges, bypasses and
tunnels have been put into place. The illustration of The Government will carry out all preparatory works
revenue collection for new projects under the new for the projects identified for private investment and
policy is provided in the earlier section. meet the cost of following items:
• Detailed Feasibility Study • Clearance from Indian Railways to allow

• Land for right-of-way and enroute facilities construction of Rail-Over-Bridges under their
• Clearance of the right-of-way land: Relocation of supervision
utility services, cutting of trees, resettlement and • Where design is left to the enterprise, giving
rehabilitation of the affected establishments details of standards and bore holes logs at bridge
• Environment Clearances sites etc.
Government Support for Major Clearances required for Road Projects
CLEARANCES CLEARING AUTHORITY
Cost Estimate Ministry of Road Transport & Highways /Public Works Department
/National Highways Authority of India (NHAI)
Techno economic Clearances Ministry of Road Transport & Highways/ Public Works Department/
National Highways Authority of India
Pollution Clearance (water & air) Central Pollution Control Board
Forest Clearance Ministry of Environment & Forests
Environmental Clearance Ministry of Environment & Forests
Company Registration Registrar of Companies
Rehabilitation & Resettlement of Displaced Ministry of Shipping, Road Transport & Highways, State Governments and NHAI
families
Foreign Direct Investment
(FDI) Policy
Introduction
Foreign Investment (in billion $)
The FDI regime has been progressively liberalised
during the course of the 1990s (particularly after 1996)
with most restrictions on foreign investment being Direct Foreign Investm ent
removed and procedures simplified. With limited Portfolio Foreign Investment
exceptions, foreigners can invest directly in India, 29.3
either wholly by themselves or as a joint venture.
India welcomes FDI in virtually all sectors, except

those of strategic concern such as defence (opened to 15.5
a limited extent), atomic energy and activities/sectors 12.5
11.4
not opened to private sector investment. 9.3
8.5
7.7 7.1
6
5
The major source of FDI in India is through the equity 4.3
route, which accounted for 81% of the total FDI 1
inflows in India. Reinvested earnings of FDI 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
companies accounted for 18% of the total Direct
Source: RBI
Investment. Acquisitions accounted for 17% of total
FDI.
Routes For Foreign Direct Investment
Investment Climate – FDI Current Situation
FDI in
Prior Permission (Foreign Investment

Automatic Route
Promotion Board)
No prior government approval required
Decision generally within 4–6 weeks
FDI equity limit-Automatic Route (illustrative list) FDI Requiring prior approval (illustrative list)
• Roads -100% • Defence production -26%
• Insurance – 26% • FM broadcasting – Foreign equity 20%
• Domestic airlines – 49% (100% for NRI investment) • News and current affairs – 26%
• Telecom services – Foreign equity 49% • Broadcasting – cable, DTH, setting up of hardware
• Private sector banks – 74% facilities-Foreign equity 49%
• Exploration and mining of coal, lignite, diamonds and • Test marketing – 100%
precious stones – 100% • Single Brand Retailing 51%
• Development of new airports – 100%
• Development of existing airports – 74%
• Trading -whole sale cash & carry & for exports-100%
Other areas (100% - Auto Route): Pharma, Non Banking Financial Services, SEZs, Food Processing
• Automatic Route - No prior Government approval • CCFI Route - Investment proposals falling outside
is required if the investment to be made falls the Automatic Route and having a project cost of
within the sectoral caps specified for the listed INR 6,000 million (USD 120 million) or more would
activities. Only filings have to be made by the require prior approval of Cabinet Committee of
Indian company with the concerned regional Foreign Investment (“CCFI”) after obtaining the
office of the Reserve Bank of India (“RBI”) within FIPB approval. Decision of CCFI is usually
30 days of receipt of remittance and within 30 days conveyed in 8-10 weeks. Thereafter, filings have to
of issuance of shares be made by the Indian company with the RBI.
Investment proposals falling within the automatic
• FIPB Route - Investment proposals falling outside route and having a project cost of INR 6,000
the automatic route would require prior million or more do not require to be approved by
Government approval. Foreign Investment CCFI.
requiring Government approvals are considered
and approved by the Foreign Investment
Promotion Board (“FIPB”). Decision of the FIPB is
usually conveyed in 4-6 weeks. Thereafter, filings
have to be made by the Indian company with the
RBI
Tax Environment
Taxation System In India Rates of Taxation

India has a well-developed tax structure with the
Domestic Companies Foreign Companies
authority to levy taxes divided between the central
and the state governments. Since 1991 tax system in • Taxed at worldwide income • Taxed at income which is
earned from a business
India has undergone a radical change in line with • Taxed at 30%
connection in India or from a
liberal economic policy. Brief description of taxes • If taxable income > INR source/asset located in
prevalent in India is given below: 10,0 0 0,0 0 0; Surcharge India.
applicable @ 10% of tax.
• Taxed at 40%
(surchage @7.5% from AY
Taxation in India
2011-2012) • If taxable income > INR
10,0 0 0,0 0 0; Surcharge
Central State • Education cess of 3% of tax
applicable @ 2.5% of tax.
(and surcharge if applicable)
Direct Taxes Indirect Taxes Other Taxes Indirect Tax
• Education cess of 3% of tax
• Dividend Distribution Tax
Personal Income Tax Customs Duty Professional Tax Value Added Tax
(and surcharge if applicable)
(DDT) is levied @ 16.995%
(16.609% from AY 2011- • No Dividend Distribution Tax
Wealth Tax Excise Duty Entry Tax
2012) on the amount of (DDT)
Corporate Tax Central Sales Tax Octroi dividend declared.
Service Tax Both the companies may be liable to Minimum Alternate Tax (MAT) of 15%
(18% from AY 2011-2012) of the book profits if the tax liability under normal
provisions is less than MAT. The above rates may be subject to more beneficial
provisions contained in a tax treaty entered into between India and the
DirectTaxation country in which the taxpayer is resident.
Tax incentive for Roads

100% tax holiday is available for those who are Minimum AlternateTax (MAT)
engaged in development or / and operation and The tax law requires companies to pay a minimum tax
maintenance of roads and highways. Such tax holiday known as MAT on the basis of profits disclosed in
can be availed for any consecutive period of 10 years the financial statements. MAT becomes payable when
within a block of 20 years starting from the year when tax liability under normal provision is less than MAT. In
the person starts developing the roads/highways. such a case, companies are liable to pay 15% (18%
Following conditions needs to be fulfilled by such from AY 2011-12) of book profits as MAT plus
person: applicable surcharge of 10% for domestic companies
• There should be a company registered in India; (surcharge of 7.5% for domestic companies from AY
• Such company is awarded a contract by the 2011-2012) and 2.5% for foreign companies. Education
government or its agency to develop the cess of 3% thereon is levied in case of both domestic
roads/highways; and foreign companies. Book profits for this
• A certificate from an accountant certifying the purpose are computed by making prescribed
deduction. adjustments to the net profit disclosed by the
corporations in their financial statements.
MAT paid by companies can be carried forward for 10 surcharge and education cess) on such dividends.
years and offset against income tax payable under the This tax is in addition to the normal corporate tax
normal provisions of tax. The maximum amount that liability (income tax levied on the company). The
can be set off against regular income tax is equal to amount of dividend declared by the parent company
the difference between the tax payable on the total (i.e. holding more than 50 percent of capital) will be
income as computed under the Income Tax Act and reduced by the amount of dividend received from its
the tax that would have been payable under the MAT subsidiary company for the purposes of computing
provisions for that year. DDT payable by the parent company if:
Dividend DistributionTax (DDT) • Such dividend is received from its subsidiary;

Dividend distributed by an Indian company is exempt • The subsidiary has paid DDT on such dividend; and
from income-tax in the hands of all shareholders. • The parent company is not a subsidiary of any
However, the Indian company is liable to pay a tax other company.
called Dividend Distribution Tax (DDT) of 16.995%
(16.609% from AY 2011-2012) (i.e. inclusive of Such tax paid is a non-deductible expense.
Withholding tax
Withholding tax compliance
Tax withholding and deposit Requisite Challan

• Tax on payment is required to be deducted at the time of • Tax withheld has to be deposited in Form ITNS-281. With
credit; or at the time of payment, whichever is earlier effect from 1 April 2008, all corporate will have to pay tax
• Amount of tax withheld is required to be deposited with the electronically
government within 7 days from the end of the month in
which tax was withheld
• In case the tax is paid or credited in the month of March, the
same can be deposited by 30 April
Quarterly statement Withholding tax certificate

• Payment to residents and non residents: Quarterly statements • Certificate in Form no. 16A to be issued to the payee within 15
for withholding tax are to be filed on or before July 15, October days from the due date for furnishing the statement of tax
15, Jan 15 and May 15. deducted at source
• Certificate in Form 16 for tax withheld on salary to be issued
annually by 31 May of the financial year immediately following
the financial year in which income was paid and tax deducted.
Determination of Taxable Income
Profit / Loss Deduct taxes already paid to Is amount

arrive at net taxes payable / Net taxes payable
as per positive?
Accounts refundable Y
Tax payable is equal to tax N

Add: Expenses Disallowed under normal provisions Net taxes refundable
as per Income Tax Act and
considered in accounts
Y
Is Tax payable
Tax payable is
under normal
equal to tax
Less: Expenses Allowed provisions higher
under MAT
as per Income Tax Act but than tax payable
N provisions
not considered in accounts under MAT?
Apply applicable tax rates

(including Surcharge & Education Calculated tax payable
Cess) to the taxable income to under ‘Minimum alternate
arrive at gross tax payable under Tax’ (MAT) provisions
normal provisions.
Double Tax Relief and Tax Treaties

India has a comprehensive tax treaty network. Taxpayers have the option to choose between the provisions
of the tax treaty or the Income Tax Act, whichever is beneficial to them. List of countries with which India has
a Double Taxation Avoidance Agreements (DTAA).
List of countries with which India has a DTAA
Armenia Denmark Jordan Namibia Serbia Trinidad and Tobago
Australia Egypt Kazakhstan Nepal Singapore Turkey
Austria Finland Kenya Netherlands Slovenia Turkmenistan
Bangladesh France Korea New Zealand South Africa UAE
Belarus Germany Kuwait Norway Spain Uganda
Belgium Greece Kyrgyz Republic Oman Sri Lanka UK
Botswana Hungary Libya Phillippines Sudan Ukraine
Brazil Iceland Malaysia Poland Sweden USA
Bulgaria Indonesia Malta Portuguese Republic Swiss Confederation Uzbekistan
Canada Ireland Maruitius Qatar Syria Vietnam
China Israel Mongolia Romania Tanzania Zambia
Cyprus Italy Morocco Russia Tazakhistan
Czech Republic Japan Myanmar Saudi Arabia Thailand

IndirectTaxation project for NHAI) at a concessional BCD rate of

Customs Duty 5%. An importer of specified goods is eligible to
Customs duty is payable on import of goods into India. claim exemption from payment of Customs duty
The rate of Customs duty is based on the Tariff on fulfillment of prescribed conditions.
classification of the goods being imported as per the • Projects funded by international organisations:
Customs Tariff Act, 1975 ('Customs Tariff') [which is In terms of customs laws, goods imported from
aligned with the Harmonised System of Nomenclature outside India for execution of projects funded by
(HSN) followed internationally]. international organisations (like World Bank, Asian
Development Bank etc.) and approved by the
Various concessions/ exemptions are available on the Government of India are exempt from levy of
basis of nature of goods, usage, status of importer, Customs duty subject to prescribed conditions.
country of import etc.
• Foreign Trade Policy ('FTP'): The FTP provides
certain exemptions/benefits to specified supplies
Name of Duty / Cess Rate
of such goods manufactured in India, where such
Basic Customs Duty ('BCD') 10%14
supplies qualify as 'Deemed Exports'. As per the
Additional Customs Duty in lieu of Execise duty ('CVD') 10.3% FTP, Deemed Exports refer to certain transactions
Education Cess (including the Secondary Higher 3% wherein the goods supplied do not leave the
Education Cess of One percent)
country and payment for supplies is received in
Additional duty of Customs in lieu of local taxes ('ADC') 4% Indian rupees or in free foreign exchange. Supplies
made to various specified projects/ purposes
qualify as deemed exports under the FTP including
Incentives/Exemptions
supplies under the following categories:
• Exemption for specified projects: An importer
I. Supply of goods to projects financed by
of specified goods is eligible to claim exemption
multilateral or bilateral agencies/funds
from payment of Customs duty15 on fulfillment of
notified by Department of Economic Affairs
prescribed conditions including:
under International Competitive Bidding
i The goods are imported by Ministry of ('ICB').
Surface Transport or a person who has been
ii. Supply of goods to any project or purpose in
awarded contract for construction of roads in
respect of which import of goods is
India by NHAI, PWD, road construction
permissible at zero-rate of Customs duty.
corporation under the control of State/ Union
Territory Government
However, in order to be eligible for Deemed Export
ii A person who has been named as a sub- benefits, supplies under the aforementioned
contractor in the contract between NHAI and categories should be made under ICB. Further, a sub-
the principal contractor for construction of contractor making supplies directly to the main
roads contractor or directly to the designated projects/
• Project Import: As per the project import agencies would also be eligible for Deemed Export
regulations, the benefit under project import benefits subject to prescribed conditions in this
would be available only to those goods which are regard.
imported against the specific contracts registered
with the appropriate authority. Under Project Excise duty
Import scheme, goods can be imported for Excise duty is levied by the Central Government on the
specified projects (including road development manufacture of movable goods in India at the time of
14. Capital goods can be imported at the general rate of 7.5 %

15. Notification No. 21/2002-Cus, dated 1 March 2002
removal of goods from the factory premise of the Value Added tax ('VAT')
manufacturer. The Central Excise Act, 1944 ('the VAT is a state specific levy on sale of goods within the
Excise Act') prescribes the rate of levy in the Excise State. The rate of VAT varies from 4%/12.5%17
Tariff Act, 1985 ('Excise Tariff'). The general rate of (depending upon the goods involved). However, a
Excise duty in India is 10.3% (Basic Excise Duty 10%, higher or a lower rate of VAT may be notified by the
Education Cess 3%). Credit of Excise duty paid is respective State Government for specified goods.
available against the output Excise duty liability/output Multiple schemes for payment of VAT are available
service tax liability. under the State VAT laws.
Incentives/Exemptions Central SalesTax ('CST')

A supplier or a manufacturer of goods (that are A transaction qualifies as an inter-state sale, where the
supplied to a contractor/ sub-contractor engaged in sale entails movement of goods from one State to
construction activities) would be eligible for exemption another. Inter-state movement of goods is liable to
from payment of Excise duty if following conditions CST under the Central Sales Tax Act, 1956 ('the CST
are fulfilled: Act') at the rate of 2 percent against statutory
• Goods are supplied against ICB declaration form ('Form C'), which can be issued by
• Goods being supplied/ manufactured are exempt the buyer for specified purposes, or at the VAT rate
from BCD, CVD and ADC when imported into India applicable on local sale of goods in the dispatching
State (i.e. the State from which the movement of
Also, all goods supplied to projects financed by goods commences pursuant to the sale). The EPC
international organisations (like World Bank, Asian contractor can issue Form 'C' for purchase of goods at
Development Bank etc.) and approved by the the concessional rate.
Government of India are exempt from levy of Excise
duty. Further, it is pertinent to note that the CST borne on
account of inter-state procurements and paid in other
ServiceTax State will not be available as credit against any output
Service tax is a federal levy on provision of specified liability.
services in India. Service tax is currently leviable at the
rate of 10.3%. Relevant taxable services category for Goods and Service tax - Proposed
construction activities include: In the Union Budget 2008-09, the Government of India
• Commercial or industrial construction services has signaled its intention to introduce a nation wide
• S i t e fo r m a t i o n , c l e a r a n c e , exc ava t i o n , Goods and Service tax ('GST') with effect from 1 April
earthmoving and demolition services 2010. GST is now slated to be introduced with effect
• Works contract services from 1 April 2011. GST would be in lieu of Excise duty,
• Management, maintenance or repair services VAT, Entry tax,, CST and Service tax.
Incentives/Exemptions GST in India would be a dual GST with Center (CGST)

Construction / maintenance of roads has been and State (SGST) levying GST at each transaction.
specifically exempted from levy of Service tax under Inter-state transaction would attract Integrated GST
the following taxable categories: (IGST) which would be sum of CGST and SGST. Credit
• Commercial or industrial construction services of CGST, SGST and IGST would be available. No credit
• Site formation and clearance, excavation, of Central GST is likely to be available against State
earthmoving and demolition services16 GST and vice-versa.
• Works contract services
• Management, maintenance or repair services.
16 Notification No. 17/2005-ST, dated 7 June 2005

17 Some states have increased the rate
Repatriation of Investments and

Profits Earned in India
Type of Income streams
Royalty Technical
Dividend Interest
Fees
Rates of Domestic law Best treaty Domestic law Best treaty Domestic law Best treaty Domestic law Best treaty
taxation NIL(a) rate 5%* 20%* rate 10%* 10%* rate 10%* 10%* rate Nil
Notes:
a. Tax free for all shareholders but Indian company declaring the dividend is subject to Dividend Distribution Tax
(DDT) at 16.995% (16.609% from AY 2011-12) of the dividend declared.
* the above rates are exclusive of surcharge and education cess.
Ministry of commerce and Industry vide Press Release dated 5 November 2009 has permitted payments for
royalty, lumpsum fee for transfer of technology, payments for use of trademark/brand name under automatic
route.
• Royalties and Technical Know-how Fees: permission of RBI is necessary for effecting
Indian companies that enter into Technology remittance, subject to specified compliances.
Transfer Agreements with foreign companies are
• Interest: Payment of interest borrowed from
permitted to remit payments towards know-how
overseas would be governed by the regulation
and royalty under the terms of the foreign
regarding external commercial borrowings.
collaboration agreement, subject to limits.
• Buyback of shares: A maximum of 25% of
• Dividends: Dividends are freely repatriable after
equity share capital permitted to be repurchased
the payment of Dividend Distribution Tax by the
in a financial year. Buyback is possible only from
Indian company declaring the dividend. No
free reserves, share premium and proceeds
Dividends are not allowed as deduction. Royalty/ fee for technical services/ interest are allowed as
deduction subject to transfer pricing norms
Repatriation of capital
Redemption of Liquidation of company

Buy back of shares Capital Reduction
preference share
from fresh issue of shares. Post repurchase, debt • Capital reduction: The company law provision
owed by company should not to exceed 2 times provides for a detailed procedure wherein the
of (capital + free reserves). There will be no tax capital of company can be reduced and money
implication in the hands of Indian company. c a n b e r e p a t r i a t e d b a ck . A s p e c i a l
However, since buy back is considered as permission/resolution is to be passed at general
transfer of shares (capital asset), therefore, meeting of shareholders authorising capital
shareholder will be liable to capital gain tax. No reduction process. Thereafter, a capital reduction
DDT to be paid by Indian company/ shareholders. process has to go through a court process which
• Redemption of preference shares: Foreign would could involve obtaining creditors approval,
capital invested in India is generally repatriable, no objection certificate from all creditors etc.
along with capital appreciation, if any, after the Cash paid to the extent of accumulated profits
payment of taxes due on them, provided the (including capitalised profits) would be liable to
investment was on repatriation basis. Preference DDT @16.995% (16.609% from AY 2011-12) in
shares are similar to equity shares carrying the hands of Indian company.
preferential right towards payment of dividend. • Liquidation of company: Cash can be
Profits on redemption of preference shares repatriated by way of liquidation of Indian
taxed are to be taxed as capital gains. This may company. Both the shareholders can exit out of
not be applicable for non-resident investors as the project simultaneously and get entire funds
preference shares can be redeemed only at par. back. Liquidation is complicated and time
DDT @ 16.995% (16.609% from AY 2011-12) consuming.
would be payable on coupon on preference
shares.
Administrative Framework
The road sector in India is a concurrent subject. The Highways (MoRTH) and Ministr y of Rural
jurisdiction of Central Government is limited to Development (MoRD).
National Highways, while the jurisdiction of State
Governments is across State Highways, Major District At the State Level, the overall policy and programme
Roads, Village Roads and Other Roads. At the Central development and resource planning is done by the
Level, the overall policy, programme development and State Planning Cell in consultation with Central
planning is done by the Planning Commission in Planning Commission and State Ministry in charge of
consultation with the Ministry of Road Transport and Roads.
Administrative Framework by Category of Roads
Road Network Coordinating Agency Connectivity To
Ministry of Road Transport and

Highways (MoRTH), National Highway
Expressways State capitals and tier 1 cities
Authority of India (NHAI) and State Road
Development Corporations
MoRTH, NHAI, BRO Union capital, state capitals, major ports,

National Highways
(Border Roads Organisation) strategic locations
State capitals, district centres, important

State Highways State Public Works Departments ( PWDs)
towns, national highways, other states
State Capitals, district centres,

Major District Roads State PWDs
important towns, national highways
Production centres, markets, highways,

Rural and Other Roads Ministry of Rural Development (MoRD)
railway stations etc
Project Roads State PWDs/Project Organisations Projects like irrigation, power, mines, etc
Urban Roads Municipal Corporations Intra city networking
Villages, district roads, highways,

Village Roads Zilla Parishads/State Governments
railway stations, riversides etc
Administrative Framework for Roads
Institutional Advisory Framework

Facilitated by
Committee on Infrastructure
Planning Commission
Finance Ministry/PPP Cell Central Level
MoRTH MoRD
(allocation
of funds for the development
(allocation of funds for the development and
maintenance of highways) and maintenance of rural roads )
Department of Road
Transport & Highways
NHAI
(NHDP implementation,
operations and Planning, Policy Secretary
maintenance) and Budgeting Panchayat Raj
State Level
State PWD
State PWD Rural Redevelopment
State Highways
(NH-Wing) & Panchayat Raj
MDRs,ODRs, Village
Roads (Rural Roads)
Road Development Corporations

(Construction, Maintenance and
Operation of Roads)
About NHAI
The National Highways Authority of India (NHAI) was Besides implementation of the NHDP, NHAI is also
constituted by an act of Parliament, the National concerned with implementation of road safety
Highways Authority of India Act, 1988. The Authority measures and environmental management and IT
was operationalised in Feb, 1995. initiatives in construction, maintenance and operation
of National Highways.
NHAI is the nodal agency responsible for the
development, maintenance and management of For projects related information kindly contact :
National Highways entrusted to it and for matters General Manager (Finance)
connected or incidental thereto. The USD 60 billion Phone : + 91(011)-25074100 & 25074200, Extn : 1418
National Highways Development Project (NHDP) has
been entirely managed by the NHAI under the
mandate of the Ministry of Road Transport &
Highways (MoRTH), Government of India.
The charter of NHAI is set out in the National

Highways Act, 1956 and National Highways Authority
of India Act, 1988:
• Delegation of power and functions of the highway
administration to NHAI
• Enhanced powers for land acquisition
• Right to collect tolls for road projects on its own or
through third parties in accordance with specified
government guidelines
• Authorisation to borrow from capital market
through bonds, debentures and other instruments
• Situation where Central Government will have
powers to override NHAI and its officials
Organisation Structure of NHAI is set out below:

NHAI CORPORATE
NHAI
OFFICE
Technical Finance Administration
Project Corridor
Management Management
NHAI FIELD
OFFICES
Project
Corridor
Implementation Unit (PIU)
Management Unit (CMU)
The administrative framework at the Head Office is set out below
Chairman Central Vigilance

Officer
Member Member Member Member Member

Finance Administration Technical (1) Technical (2) &(3) PPP
CGM (HR & CGM (S R&D) CGM (Technical)-

CGM (Finance) CGM (PQ)
Admn) CGM (Safety) (2) & (3)
CGM (LA)
CGM (IT)
CGM (CM)
CGM (Legal)
Annexure
List of CD Contents
1. Overview of the Model Concession Agreement (BOT-Toll)

2. Model document of Request for Qualification
3. Model document of Request for Proposal
4. Arbitration Act, 1996
5. Central Road Fund Act
6. Land Acquisition Act
7. The Indian Tolls Act
8. New National Highways Fee Rules
9. Motor Vehicles Act
10. NHAI Act, 1988
11. Environment Protection Act
12. Manual and Specification for 6-laning
15. Road Transport Policy
16. Reserve Bank of India Policy
17. Soft Copy of the Brochure
Useful Addresses
National Highways Authority of India Registrar of Companies
G 5&6, Sector-10, Dwarka, Department of Company Affairs
New Delhi - 110 075 Ministry of Finance
Phone: 91-011-25074100 & 25074200 'B' Block, IInd Floor, Paryavaran Bhawan
Fax : 91-011-25093507, 25093514 C.G.O. Complex, New Delhi-110 003, India
www.nhai.org www.dca.nic.in
Ministry of Finance, Government of India / Border Roads Organisation

Department of Economic Affairs Seema Sadak Bhawan
North Block, New Delhi Ring Road Naraina
www.finmin.in Delhi Cantt 110010
www.bro.nic.in
Department of Road Transport and Highways
Transport Bhavan Central Institute of Road Transport
1, Parliament Street Bhosari, Pune - 411026, India
New Delhi 110 001 www.cirtindia.com
www.morth.nic.in
National Portal of India
Department of Industrial Policy and Promotion www.india.gov.in/
Joint Secretary
Secretariat for Industrial Assistance (SIA) Directory of Indian Government Websites
Ministry of Commerce & Industry www.goidirectory.nic.in/
Udyog Bhavan, New Delhi-110 011, India
www.dipp.nic.in Press Information Bureau (PIB)
www.pib.nic.in/
Reserve Bank of India (RBI)
Foreign Investment Division,
Shaheed Bhagat Singh Road,
Mumbai-400 001, India
www.rbi.org.in
Foreign Investment Promotion Board

Ministry of Finance
Government of India
North Block, Lok Nayak Bhavan,
New Delhi
Not just roads... building a NATION

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Government of India

Ministry of Shipping, Road Transport and Highways

Guidelines for Investment in

Not just roads... building a NATION

Financing National Highway

Public Private Partnership in

Revenue Risks and Mitigation 26

Overview of Successful Projects 29

Work Plan-II (2010-11) 31

Foreign Direct Investment Policy 37

The information contained herein is of a general nature and is not intended to

1. INR 50 = 1 USD : figures approximated

Current Status of NHDP4

4. As on 30th April, 2010.

Financing National Highway Projects

Summary of Externally Aided Projects

Awarded Awarded Completed

NHDP Phase I 18 983 5538 14 699

NHDP Phase II EW Corridors 12 482 3208 - -

Sub-Total A 30 1465 8746 14 699

NHDP Phase I 13 766 2374 10 615

NHDP Phase I 7 150 634 7 150

Approved Financing Plan of NHDP (as on 31st March, 2009)

Phase Particulars Projected For (Kms) INR Crore

Cess and Market Borrowings 18,846

Projects awarded on Negative Grant

Delhi-Gurgaon 28 710 142 61 12

Rajkot Bypass-Jetpur 36 388 77 59 12

Panipat elevated Highways 10 270 54 96 19

Salem- Karur 42 253 51 46 9

Krishnagiri - Thopurghat 62 372 74 140 28

Tindivanam-Ulundurpet 71 480 96 152 30

Jalandhar- Amritsar 49 263 60 7 1

Ambala-Zirakpur 36 298 60 106 21

Dhule-Pimpalgaon 118 556 111 59 12

Vadodara Bharuch 83 660 132 471 94

Bharuch-Surat 65 492 118 504 101

Projects awarded on Revenue Share Basis

Surat-Dahisar 239 2600 619 38%

Gurgaon-Jaipur 225 1900 452 48%

Panipat-Jalandhar 291 2200 523 20%

Chennai-Tada 42 317 76 17%

Vijayawada-Chilkaluripet 85 1173 280 2%

Public Private Partnership in

6. As per recommendations of B K Chaturvedi Committee

Risk Framework of Model Concession Agreement

The commercial and technical risks relating to

Salient features of the MCA

Opportunities for Investment-State-Wise Projects Under NHDP Phase II

Estimated Project Cost

1 Udarband to Harangajo 54 31 202 40

STATE: Jammu & Kashmir

1 Two Tunnels on Udhampur-Banihal- 1A 19 5000 1000

1 Walayar-Vadakkancherry 47 55 600 120

STATE: Tamil Nadu

1 Salem-Coimbatore Kerala 47 82 540 108

STATE: Uttar Pardesh

1 Agra Bypass Km176-800 of NH-2 to 23 33 345 69