Public Private Partnership: Vadodara-Halol Toll Road: Case Study 07 November 2013
Public Private Partnership: Vadodara-Halol Toll Road: Case Study 07 November 2013
Public Private Partnership: Vadodara-Halol Toll Road: Case Study 07 November 2013
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b. Periodic Overlay (every five year) concession agreement ensured that the private
developer earned toll revenues till he was able to
c. Periodic Renewal (every fifteen year)
achieve a return of 20% on the overall investment.
d. Toll operation and management (once a year) This was further protected with a provision for
The concession period will end in 2030. However, in additional revenues i.e. development rights on
case the developer is unable to recover project cost land parcels abutting the road, in case the toll
and earn a return, there is a possibility of extension of revenues did not result in the expected returns.
the concession period. The typical extension allowed There was also an annual toll revision linked to
under the Concession Agreement is for two years. This wholesale price index/consumer price index to the
is a rolling period, which means that the concession extent of 100% of the rates which resulted in the
period will keep extending by two years till the time developer having an assured revenue stream.
the Concessionaire is able to gain a return of 20% on Further, the lack of penal provision for non-
the investment. compliance with performance standards during
operation and maintenance meant that the
Key Lessons developer could save on costs if desired. Adverse
The case study provides several insights that need to effects of Change in Law, occurrence of a Force
be highlighted so that lessons can be drawn and Majeure event, unexpected increase (more than
applied to other projects as well. 25%) in the estimated costs of any maintenance
expenditure, interest rates fluctuations, inflation
Assessment of market is critical: The VHTR case exceeding 50%, were all made pass through to the
makes it amply clear that the pre-development consumers.
preparations need to be more robust since such
preparations can impact the long term objectives Environmentally and Socially responsive
of the project. For instance, the traffic estimations development framework: The VHTRL was the first
for the project were based on the assumptions project that introduced Environmental and Social
that the industrial incentives available for the area Safeguards measures as part of the contractual
would continue for long-term. Eventually, with obligation of the developer. This created a
time the incentives were withdrawn and the traffic benchmark and had immense demonstration value
was almost 50% lower than the projected traffic. since it highlighted that infrastructure can be
Such unaccounted risk factors can jeopardize the developed in an environmentally and socially
project and lead to significant losses. responsible manner.
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