Viability Gap Funding For PPP Projects in BOT Highway Sector

ACKNOWLEDGEMENT
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR
ACKNOWLEDGEMENT
First and foremost I offer my sincerest gratitude to my supervisor, Mr. Sagar Deshmukh, who has supported me throughout my thesis with his patience and knowledge whilst allowing me the room to work in my own way. Without him this thesis would not have been completed or written. One simply could not wish for a better or friendlier supervisor. Then I offer my gratitude to Prof. C. B. Shah, Chairman of the Thesis Committee, School of Building Science and Technology, CEPT University, for taking periodical reviews that helped me in finish my work at scheduled intervals. He has always enlightened my ways with his thoughtful and constructive comments in the reviews that helped me in focusing my vision and moving in the right direction. I would also like to thank Mr. S H. Vora (General Manager, L&T- ECC Division), Mr. M. Ramesh (Chief Project Officer, RJVRP) Mr. A Prajapati (Managing Director, GSRDC), other Engineers and Managers of L&T-ECC Division at Rajkot-Jamnagar-Vadinar Road Project for devoting special time to help develop this thesis. I would also like to take this opportunity to express my gratitude towards the School of Building Science and Technology which helped me over the years to develop myself as a person and made me capable enough of completing this thesis. Last but not the least, I am greatly thankful to my family for their faith in me, their support and many sacrifices made over the entire period of this thesis to help me complete my work without distraction.
Prithviraj Gohil (2405) School of Building Science and Technology, CEPT University
Prithviraj Gohil (2405)
B.Tech (Civil Construction), CEPT University
ABSTRACT
INDEX CHAPTER - 1 INTRODUCTION

1.1 INTRODUCTION 1.2 NEED FOR STUDY 1.3 OBJECTIVES 1.4 RESEARCH METHODOLOGY 1.3 SCOPE OF WORK
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CHAPTER - 2 LITERATURE STUDY

2.1 INTRODUCTION 2.2 PUBLIC PRIVATE PARTNERSHIP 2.3 BUILD OPERATE TRANSFER 2.4 VIABILITY GAP FUNDING
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CHAPTER 3 DATA COLLECTION

3.1 INTRODUCTION 3.2 DATA COLLECTION METHODOLOGY 3.3 PROJECT DETAILS 3.4 LOCATION MAP 3.5 TRAFFIC DATA 3.6 PROJECT COSTS
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CHAPTER 4 DATA ANALYSIS

4.1 INTRODUCTION 4.2 COST OF PROJECT 4.3 TRAFFIC FORCAST 4.4 REVENUE GENERATION (TOLL) 4.5 FINANCIAL ANALYSIS
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CHAPTER 5 CONCLUSION
5.1 CONCLUSION OF STUDY
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ABSTRACT
CHAPTER 6 FUTURE SCOPE

6.1 FUTURE SCOPE OF STUDY
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BIBLIOGRAPHY
REFERENCES
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ANNEXURES
ANNEXURE 1 ANNEXURE 2 ANNEXURE 3 ANNEXURE 4 ANNEXURE 5 ANNEXURE 6
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LIST OF TABLES
1.1 ROAD LENGTH DATA 1.2 CHANGE IN TREND OF ROAD TRAFFIC 3.1 TRAFFIC SURVEY DETAIL 3.2 AVERAGE DAILY TRAFFIC VOLUME (ADT IN VEHICLES) 3.3 ANNUAL AVERAGE DAILY TRAFFIC VOLUME (AADT IN VEHICLES) 3.4 TRAFFIC CONSUMPTION 3.5 PEAK HOUR SHARE OF TRAFFIC 3.6 TRAFFIC VOLUME - SALIENT FEATURES 3.7 BREAKUP OF TRIPS INTERNAL AND EXTERNAL TO GUJARAT 3.8 TREND BASED GROWTH RATES 3.9 UNIT RATE OF STRUCTURES 3.10 STRUCTURE DETAILS ON THE CORRIDOR 3.11 TOTAL CONSTRUCTION COST 3.12 TOTAL PROJECT COST 4.1 TOTAL CONSTRUCTION COST SCENARIO 1 4.2 TOTAL PROJECT COST SCENARIO 1 4.3 TOTAL CONSTRUCTION COST SCENARIO 2 4.4 TOTAL PROJECT COST SCENARIO 2 4.5 TOTAL CONSTRUCTION COST SCENARIO 3 4.6 TOTAL PROJECT COST SCENARIO 3 4.7 TOTAL CONSTRUCTION COST SCENARIO 4 4.8 TOTAL PROJECT COST SCENARIO 4 4.9 ANNUAL TRAFFIC FORCAST (RAJKOT TO JAMNAGAR BYPASS) 4.10 ANNUAL TRAFFIC FORCAST (JAMNAGAR BYPASS TO VADINAR)
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ABSTRACT
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR 4.11 TOLL RATES 44 4.12 TOLL RATES/TRIP (RAJKOT TO JAMNAGAR BYPASS) 45 4.13 TOLL RATES/TRIP (JAMNAGAR BYPASS TO VADINAR) 45 4.14 FINANCIAL ANALYSIS 46
LIST OF FIGURES
1.1 RESEARCH METHODOLOGY 2.1 EXISTING SCENARIO OF PPP IN VARIOUS SECTOR IN INDIA 3.1 DATA COLLECTION METHODOLOGY 3.2 LOCATION MAP OF CASE STUDY 3.3 R-J-V PASSENGER DESIRE LINE 3.4 R-J-V FREIGHT TRAFFIC DESIRE LINE 3.5 LOGISTIC MAP OF CORRIDOR 4.1 TRAFFIC COMPOSITION SURVEY
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INTRODUCTION
1.1 INTRODUCTION
India has a road network of over 3.314 million kilometers (2.059 million miles) of roadway, making it the third largest road network in the world behind Monaco and Macau only. At 0.66 km of highway per square kilometer of land the density of Indias highway network is higher than that of the United States (0.65) and far higher than that of China's (0.16). Historically, the funds set aside for the maintenance and expansion of the road network have been insufficient, but major efforts are currently underway to modernize the country's road infrastructure. The road infrastructure breakup of India is as follows:
S.No.
1 2 3 4
Catagory
National Highways/Expressways State Highways Major district roads Rural & other roads Total (approx)
Length (in km)

66,754 128,000 470,000 2,650,000 3,314,754
Table 1.1: ROAD LENGTH DATA
About 65 per cent of freight and 86.7 per cent passenger traffic is carried by the roads. Although National Highways constitute only about 2 per cent of the road network, it carries 40 per cent of the total road traffic. The number of vehicles has been growing at an average pace of 13.10 percent per annum over the years 1999-2000 to 2007-08, whereas the share of road in total traffic has grown from 13.8 per cent of freight
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INTRODUCTION
traffic and 15.4 per cent of passenger traffic in 1950-51 to an estimated 65 per cent of freight traffic and 86.7 per cent of passenger traffic by the end of 2007-08. Change in trend of traffic over the years is as follows:
Years
1950-51 2007-08
Freight Traffic
13.8 65
Passenger Traffic
15.4 86.7
Table 1.2 CHANGE IN TREND OF ROAD TRAFFIC

Today, advanced technology & mechanization has touched all the field of construction & has made the construction process more complex & uncertain. Therefore, Governments worldwide have shown increasing initiatives in private finance of public infrastructure and services across a wide range of industries and sectors, including Power, Transportation, Water supply and disposal, Telecommunications, Oil and Gas. Historically, investments in the infrastructure, particularly in the highways, were being made by the government mainly due to the need of huge volume of resources required, long gestation period, uncertain returns and various associated externalities. The galloping resource requirements and the concern for managerial efficiency and consumer responsiveness have led in recent times to an active involvement by the private sector also. Roads and Highways are amongst one of the priority sectors. Governmental budgets are to deal with number essentials along with infrastructure. Beyond this if one has to have accelerated growth of road infrastructure Government funding alone is constrained. Private sector pitching in and providing momentum is need of the time. Since 1990s Government worldwide have resorted to such initiatives such as privatization of the public assets, contracting out of services which were traditionally being provided by the public sector, or the use of the private capital to build social infrastructure. Historically, road infrastructure has been provided by the State. The enormous investment requirement, long gestation period and uncertainty of returns were mainly responsible for the lack of interest by the private sector. The presence of significant externalities also warranted the dominant role of the State in providing basic road infrastructure. In the allocation of budgetary resources, therefore, the development of road infrastructure is still given priority. However, the resource requirements for maintenance and expansion have far exceeded the capacity of the budget, making a strong case for private sector participation. Resource constraints, however, are not the only reason for encouraging private sector participation in the development of road infrastructure. A number of benefits accrue as a result of private sector participation in the development of road infrastructure. The most palpable benefit is the expansion of road network. In addition, private sector participation is expected to help upgrade the technology, improve the quality and lower the costs. As per the Database compiled by the Department of Economic Affairs, Ministry of Finance, Government of India, there are 262 road projects in PPP mode - 82 road projects entailing collective project
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INTRODUCTION
cost of Rs. 31,335 crore mostly contracted by NHAI (Centre) and 180 road projects entailing collective project cost of Rs. 49,457 crore contracted by various State Governments as of July 2009. PPP initiative in the Roads Sector has been largely on the BOT basis. The policy framework for tollbased BOT projects was approved in 1997. Contracts based on BOT model are inherently considered superior to the traditional Engineering Procurement and Construction (EPC) contracts as BOT projects ensure higher quality of construction and maintenance of roads and completion of projects without cost and time overrun. And after the concession period, which can range up to 30 years, road is to be transferred back to the Government/public sector by the concessionaire. Also, to attract the private sector to projects that are not commercially viable but considered essential, the government has established a Viability Gap Funding (VGF) mechanism to provide a grant of up to 40% of the project cost.
Viability Gap Funding (VGF) Scheme addresses the following concerns: Address the issue of affordability of user fee Leverage government grant to improve commercial viability of projects Promote user pay principle Ensure market based selection of promoter Promote concept of developer (in place of contractor) and address project life cycle costs
1.2 NEED FOR STUDY

This Scheme aims to ensure wide spread access to infrastructure provided through the PPP framework by subsidizing the capital cost of their access. Meeting the funding gap to make economically essential projects commercially viable would obviate the need for Government funding for such projects and allow private sector participation in the projects, thus facilitating private sector efficiencies in infrastructure development. This is a relatively new concept in PPP Projects and it addresses the following concerns connected to them: It addresses the issue of affordability of user fee It leverages government grant to improve commercial viability of projects It ensures market based selection of promoter It promotes the concept of developer (in place of contractor) and addresses project life cycle costs.
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INTRODUCTION
1.3 OBJECTIVES

To find out the requirement of Viability Gap Funding Scheme in BOT Projects in Highway Sector. To establish the needs and/or advantages of VGF Scheme in PPP projects in highway sector in Gujarat. To prepare a hypothetical model using the Viability Gap Funding Scheme, over an existing, already completed BOT Highway sector project, to justify the scheme.
1.4 RESEARCH METHODOLOGY
The research methodology includes the analytical research over primary as well as secondary data, where Research mainly comprises of Literature Reviews from various national & international journals on highway sector, presentations prepared by experts, various reports prepared by individuals, groups, committees and organisations as well as certain reviews related to BOT highways projects. The data collection is done basically from primary sources and few from secondary sources as well. The data obtained by case studies is also analyzed to arrive at the quantitative values for justifying the above analysis. As per the data collected, analysis is carried out on the probabilistic approach as well as by manual evaluation of facts.
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INTRODUCTION
VIABILITY GAP FUNDING FOR PUBLIC PRIVATE PARTNERSHIP PROJECTS IN BOT HIGHWAY SECTOR NATIONAL AND INTERNATIONAL JOURNALS WEB SITES NEWSPAPERS PRESENTATIONS PREPARED BY EXPERTS AND ORGANISATIONS REPORTS, THESIS ON SIMILAR TOPICS.
LITERATURE STUDIES
DATA COLLECTION
ORGANISATIONS CONNECTED WITH THE ABOVE PROJECTS, CONSULTANTS, AGENCIES, ETC. LARSON & TOUBRO ECC DIVISION GUJARAT STATE ROAD DEVELOPMENT CORPORATION (GSRDC) GUJARAT INFRASTRUCTURE DEVELOPMENT BOARD (GIDB) END USERS
DATA ANALYSIS
MANUAL EVALUATION BY FACTS PROBABILISTIC APPROACH
COMMENTS, SUGGESTIONS AND CONCLUSION
Figure 1.1 RESEARCH METHODOLOGY
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INTRODUCTION
1.5
SCOPE OF WORK
Work Hypothesis o o I have defined the feasibility of VGF Scheme for State highway in Gujarat region. Case Study: Rajkot-Jamnagar-Vadinar Road Project on SH-25 from Rajkot to Jamnagar. And Ahmedabad-Viramgam-Maliya Road Project on SH-7 and SH-17 from Ahmedabad to Maliya. The project details in conceiving, development and implementation stages, contract conditions, relevant clauses, etc.
Geographical o Case Study of above mentioned projects.
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LITERATURE REVIEW
2.1 INTRODUCTION
Government of India recognizes that there is significant deficit in the availability of physical infrastructure across different sectors and that this is hindering economic development. The development of infrastructure requires large investments that cannot be undertaken out of public financing alone, and that in order to attract private capital as well as the techno-managerial efficiencies associated with it, the Government is committed to promoting Public Private Partnerships (PPPs) in infrastructure development. The Government of India recognizes that infrastructure projects may not always be financially viable because of long gestation periods and limited financial returns, and that financial viability of such projects can be improved through Government support. Therefore, the Government of India has decided to put into effect the following scheme for providing financial support to bridge the viability gap of infrastructure projects undertaken through Public Private Partnerships.
This scheme aims at supporting infrastructure projects that are economically justified but fall short of financial viability. The lack of financial viability usually arises from long gestation periods and the inability to increase user charges to commercial levels. Infrastructure projects also involve externalities that are not adequately captured in direct financial returns to the project sponsor. Through the provision of a catalytic grant assistance of up to 20% of the capital costs, several projects may become bankable and help mobilise the much needed private capital and efficiencies. This scheme will be called the Scheme for Financial Support to Public Private Partnerships (PPPs) in Infrastructure. It will be a Plan Scheme to be administered by the Ministry of Finance. Suitable budgetary provisions will be made in the Annual Plans on a year-to-year basis.
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B. Tech (Civil Construction), CEPT University
LITERATURE REVIEW
2.2 PUBLIC PRIVATE PARTNERSHIP
Understanding Public Private Partnership (PPP) Projects

It describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP, P3 or P . PPP involves a contract between a public-sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. Definition by Department of Economic Affairs, Ministry of Finance, Government of India PPP means an arrangement between a government or statutory entity or government owned entity on one side and a private sector entity on the other, for the provision of public assets and/ or related services for public benefit, through investments being made by and/or management undertaken by the private sector entity for a specified time period, where there is a substantial risk sharing with the private sector and the private sector receives performance linked payments that conform (or are benchmarked) to specified, pre-determined and measurable performance standards.
3
Why we need to define PPPs?

There is varying understanding amongst stakeholders as to what constitutes a Public Private Partnership. There are views that a PPP is only when there is private investment, while others contend that PPPs include all forms of interactions between the public sector and the private sector, from consultations or policy dialogue and collaboration, to private provision of assets and services. Definitions are also required to identify eligible projects or arrangements that could be recipients of desired benefits or applicable procedures or treatment. For example, a project when designated as a PPP, can access various modes of government support like viability gap funding, project development funding etc. Further, some of the PPPs might involve contingent liabilities for the sponsoring government, in various forms, such as, liabilities towards lenders in case of contract termination or minimum revenue guarantees. The contingent liabilities require the government to make requisite provisions in its budgets. The potential fiscal implication of PPPs makes the parameters for its designation important.
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Furthermore, protection of user interests in PPPs and the need to secure value for public money, demand a more rigorous treatment of such projects. The provision of the government support also requires a higher public scrutiny of projects designated as PPPs. The specific requirements of the aspects mentioned above might require a different set of projects to be designated as PPPs. For provision of government support to PPPs, the government might give importance to requirements of private investment and user charges. On the other hand, for approval of projects, the government would like to scrutinise even those projects where private sector is engaged in providing a critical service to general public irrespective of whether there is private investment or not. To cater to such different objectives and context, each competent government authority that uses the PPP definition to designate projects as PPP would need to specify its own set of essential conditions. Such conditions should be in addition to the common definition and should be exclusively for a specific purpose like grant of VGF support, public scrutiny or provisioning of contingent liabilities, etc.
Why we need PPPs?

Development of infrastructure and provision of basis civic services has always been considered a very important public sector activity for the following reasons: Governments have recognised the crucial role of infrastructure in fostering economic growth and reducing poverty. Because of its public good and essential nature, Governments have attempted to ensure availability of basic civic services irrespective of market conditions. For a number of economic, social and political reasons, private sector involvement in these important areas was slow to develop and thus uneven. Provision of public services and infrastructure has traditionally been the exclusive domain of the government. However, with increasing population pressures, urbanisation and other developmental trends, governments ability to adequately address the public needs through traditional means has been severally constrained. This has led the Governments across the world to increasingly look at the private sector to supplement public investments and provide public services through Public Private Partnerships.
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LITERATURE REVIEW
Salient features of PPP

Arrangement with Private Sector Entity: The asset and/or service under an arrangement will be provided by the Private Sector Entity1 to the public. Public asset or service for public benefit: Has the element of facilities/ services being provided by the Government as a sovereign to its people. To better reflect this intent, two key concepts are elaborated below: Public Services are those services that the State is obligated to provide to its citizens (towards meeting the socio-economic objectives) or where the State has traditionally provided the services to its citizens. For example, provision of security, law and order, electricity, water, etc. to the citizens. Public Asset is that asset the use of which is inextricably linked to the delivery of a Public Service. For example, public road which is linked to public transportation or those assets that utilize or integrate sovereign assets to deliver Public Services. For example, right of way on highways, shore-land of about 0.5 km abutting the ocean, or use of river / water bodies, etc. Ownership by Government need not necessarily imply that it is a PPP. For example, a captive jetty is not a PPP even though it uses a sovereign asset, while a common user port is a PPP as in the latter case the service is provided for use by public. Investments being made by and/or management undertaken by the private sector entity: It provides for both investment and non-investment PPPs, which is also the international practice. By broad basing the definition, India will gain access to a plethora of PPPs that focus on efficiency to deliver quality services to the public. Operations or management for a specified period: Provides an element of time period after which the arrangement with the private sector entity comes to a closure. Hence, the arrangement is not in perpetuity. Substantial risk sharing with the private sector: It is typically specified to differentiate PPPs from mere outsourcing contracts. For example, a facility service contract is also an outcome based reward contract but not a PPP. Performance linked payments: It is to provide central focus on performance and not merely provision of facility or service. A mere deferred payment contract should not get qualified as a PPP. Conformance to performance standards: It is to provide a strong element of service delivery aspect and the concepts of quality and compliance to pre-determined and measurable standards to be specified by the sponsoring authority.
Page 10 B. Tech (Civil Construction), CEPT University
LITERATURE REVIEW RE
Exclusions from PPP

Any Engineering Procurement Construction (EPC) contract, whether payments are deferred or on percentage completion of work or other terms, and where the management or operations and maintenance of the asset is not retained by the private sector after three years from completion of construction Any arrangement for supply of goods or services for a period of up to three years Any arrangement or contract that only provides for a hire or rent or lease of an asset without any performance obligations and other es essential features of a PPP.
Public Private Partnership Projects in various Sectors Education

Airports 1% 0% Energy 5% Ports 10% Railways 1% Airports Education Energy Ports Railways Roads 60% Roads Tourism Urban Development Tourism 7% Urban Development 16%
Fig 2.1 EXISTING SCENARIO OF PPP PROJECTS IN VARIOUS SECTORS IN INDIA
Eligibility of PPP Projects

In order to be eligible for funding under this Scheme, a PPP project shall meet the following criteria: The project shall be implemented i.e. developed, financed, constructed, maintained and operated for the Project Term by a Private Sector Company to be selected by the Government or a statutory entity through a process of open competitive bidding, provided that in case of railway projects that are not amenable to operation by a Private Sector Company, the ay Empowered Committee may relax this eligibility criterion. The PPP Project should be from one of the following sectors: Roads and bridges, railways, seaports, airports, inland waterways waterways
LITERATURE REVIEW
Power Urban transport, water supply, sewerage, solid waste management and other physical infrastructure in urban areas Infrastructure projects in Special Economic Zones International convention centres and other tourism infrastructure projects
2.3 BUILD OPERATE TRANSFER
Understanding the Build Operate Transfer (BOT) Projects

It is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract. This enables the project proponent to recover its investment, operating and maintenance expenses in the project. Due to the long-term nature of the arrangement, the fees are usually raised during the concession period. The rate of increase is often tied to a combination of internal and external variables, allowing the proponent to reach a satisfactory internal rate of return for its investment. Traditionally, such projects provide for the infrastructure to be transferred to the government at the end of the concession period. Build-Operate-Transfer is the best option for organizations that want to have their own captive center, but do not possess local expertise or extensive resources necessary to set up near shore operations using do-it-yourself approach. This type of arrangement is used typically in complicated long-term projects as seen in power plants and water treatment facilities. In some arrangements, the government does not assume ownership of the project. In those cases, the company continues running the facility and the government acts as both the consumer and regulator.
The 3 Stages of BOT Model

Build: Set-up the facility and infrastructure, staff the development center, and establish knowledge transfer Operate: Manage the offshore organization: Program Management, Development, QA, maintenance, enhancements, and product support Transfer: Register a new offshore subsidiary for the customer, transfer assets, and handover operations
LITERATURE REVIEW
Benefits of BOT Model

Cost savings compared to 3rd party vendor partnerships Direct control on hiring and retention Ability to retain Intellectual Property Rights Rapid , Seamless scaling of operations Wider service offerings, quickly filling business model gaps Lower infrastructure set-up costs
2.4 VIABILITY GAP FUNDING
Understanding the Viability Gap Funding Scheme

The Viability Gap Funding Scheme provides financial support in the form of grants, one time or deferred, to infrastructure projects undertaken through public private partnerships with a view to make them commercially viable. Government of India has established a Viability Gap Fund to aid the PPP infrastructure projects which face the viability gap due to inherent nature of the project. The Scheme is administered by the Ministry of Finance.
The financial support (VGF) to be provided under this scheme shall be in the form of a capital grant at the stage of project construction. The amount of VGF shall be equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20% of the total project cost. In case the sponsoring Ministry/ State Government/ statutory entity proposes to provide any assistance over and above the said VGF, it shall be restricted to a further 20% of the total project cost.
History
This scheme was formulated by the Ministry of Finance in consultation with the Planning Commission and other stakeholders. The scheme was considered and approved by the Committee on Infrastructure, chaired by the Prime Minister, and was subsequently endorsed by the Union Cabinet. Following a notification by the Finance Ministry in January 2006, the scheme has been put in operation and assistance to several projects is already under consideration.
LITERATURE REVIEW
This intervention enabled the Government to enhance private sector participation in critical infrastructure sectors. By offering grant assistance of up to 20% of the project costs, the Government was able to use its scarce budgetary resources to leverage a much larger pool of private capital.
Why do we need VGF Scheme?

This scheme aims at supporting infrastructure projects that are economically justified but fall short of financial viability. Investment decisions in the infrastructure sector through private sector engagement remains a challenge, especially where there is lack of excludability. Infrastructure projects often have high social but an unacceptable commercial rate of return. These are generally characterised by substantial investments, long gestation periods, fixed returns, the inability to increase user charges to commercial levels, etc. that make it essential that Government supports infrastructure financing, through appropriate financial instruments and incentives. Capital grant, as an instrument of government support, to make socially viable projects commercially viable through an efficient and transparent allocation basis, is an accepted economic proposition. Infrastructure projects also involve externalities that are not adequately captured in direct financial returns to the project sponsor. Through the provision of a catalytic grant assistance of up to 20% of the capital costs, several projects may become bankable and help mobilise the much needed private capital and efficiencies. Apart from the financial support to be made available under this scheme, an additional grant of up to 20% can be provided by the sponsoring Ministry or State Government. The lead financial institution for the project shall be responsible for regular monitoring and periodic evaluation of project compliance with agreed milestones and performance levels, particularly for the purpose of grant disbursement.
Applicability of the VGF Scheme

This Scheme will apply to PPP projects posed by the Central Ministries, State Governments and statutory authorities, as the case may be, which owns the underlying assets. Proposals to be made under this scheme shall be considered for providing Viability Gap Funding (VGF), one time or deferred, with the objective of making a PPP project commercially viable. The proposal shall relate to a Public Private Partnership (PPP) project which is based on a contract or concession agreement between a Government or statutory entity on the one side
LITERATURE REVIEW
and a private sector company on the other side, for delivering an infrastructure service on payment of user charges.
The project should provide a service against payment of a pre-determined tariff or user charge. The quantum of financial support (VGF) to be provided under this Scheme shall be in the form of a capital grant at the stage of project construction. The amount of VGF shall be equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20 percent of the total project cost. In case the sponsoring Ministry/State Government/statutory entity proposes to provide any assistance over and above the said VGF, it shall be restricted to a further 20 percent of the total project cost.
The Appraisal and Approval by Empowered Committee

The proposal for seeking clearance of the Empowered Institution shall be sent (in six copies, both in hard and soft form) to the PPP Cell of the Department of Economic Affairs. The proposal should include copies of all project agreements (such as concession agreement, state support agreement, substitution agreement, escrow agreement, O&M agreement and shareholders agreement, as applicable) and the project report.
The proposal will be circulated by the PPP Cell to all members of the Empowered Institution for their comments. All comments received within four weeks shall be forwarded by the PPP Cell to the concerned Administrative Ministry, State Government or statutory authority, as the case may be, for submitting a written response to each of the comments. In case the project is based on a model concession agreement, the comments will be furnished within two weeks.
The proposal, along with the project report, concession agreement and supporting agreements/documents, together with the comments of the respective Ministries and the response thereto, will be submitted by the PPP Cell to the Empowered Institution for consideration and in principle approval.
While submitting the proposal to the Empowered Institution, the PPP Cell will indicate whether the proposal conforms to the mandatory requirements of the Scheme. Deficiencies, if any, will be indicated in the note of PPP Cell. In particular, the Department of Economic Affairs and the Department of Expenditure will examine the proposals with a view to ensuring that they conform to the conditions specified in the Scheme. Planning Commission will examine the project report and the concession agreement with a view to ensuring that the proposal is broadly in order.
The Empowered Institution will either approve the proposal in principle (with or without modifications) or advise the concerned Ministry, State Government or statutory authority, as the
LITERATURE REVIEW
case may be, to provide additional clarifications/information or to make necessary changes for further consideration of the Empowered Institution.
Approval under this Scheme will be for the purposes of this Scheme only. All other statutory, financial or administrative approvals shall be obtained as applicable. For projects owned by the Central Government or its statutory entities, approval of PPPAC shall also be obtained in accordance with the guidelines issued by the Ministry of Finance. However, these approvals may be obtained simultaneously in order to save on time.
In cases where financial support is available from any other Ministry of the Central Government under an on-going Scheme for assistance to PPPs, the proposal would be sent to such Ministry for consideration. In case the Ministry recommends that the proposal be considered for additional assistance under this Scheme, the same shall be submitted to the Empowered Committee for consideration.
Once cleared by the Empowered Institution, the project would be eligible for financial support under this Scheme.
Invitation to Bid
Financial bids shall be invited by the concerned Ministry, State Government or statutory entity, as the case may be, for award of the project within four months of the approval of the Empowered Institution. This period may be extended by the Department of Economic Affairs, as necessary. The private sector company shall be selected through a transparent and open competitive bidding process. The criterion for bidding shall be the amount of VGF required by a private sector company where all other parameters are comparable.
Disbursement of VGF
Within three months from the date of award, or such extended period as may be permitted, the Lead Financial Institution shall present its appraisal of the project (in six copies, both in hard and soft form) for consideration and approval of the Empowered Institution. The appraisal shall be accompanied by an updated application along with the project report and project agreements. The Lead Financial Institution shall verify the contents of the application and convey its recommendation to the Empowered Institution. Prior to final approval by the Empowered Institution, the Ministry, State Government or statutory authority, as the case may be, proposing the project, shall certify that the bidding process conforms to the provisions of this Scheme and that all the conditions specified in the Scheme have been complied with.
LITERATURE REVIEW
Prior to disbursement, the Empowered Institution, the Lead Financial Institution and the private sector company shall enter into a Tripartite Agreement in such format as may be prescribed by the Empowered Committee from time to time. For the purposes of this Scheme, a Lead Financial Institution shall be the Financial Institution (FI) that is funding the project, and in case of a consortium of FIs, the FI designated as such by the consortium shall be the Lead Financial Institution. VGF shall be disbursed only after the private sector company has subscribed and expended the equity contribution required for the project and will be released in proportion to debt disbursements remaining to be disbursed thereafter. Viability Gap Funding up to Rs. 100 crore for each project will be sanctioned by the Empowered Institution Proposals up to Rs. 200 crore will be sanctioned by the Empowered Committee. Amounts exceeding Rs. 200 crore will be sanctioned by the Empowered Committee with the approval of Finance Minister. The Lead Financial Institution shall be responsible for regular monitoring and periodic evaluation of project compliance with agreed milestones and performance levels, particularly for the purposes of disbursing the VGF. It shall also send a quarterly progress report to the Empowered Institution.
DATA COLLECTION
3.1 INTRODUCTION
Roads and Buildings Department (R&BD), Government of Gujarat has been implementing several road projects over the years with the state, centre and multi-lateral funding. In addition, the state has implemented road projects through private sector participation. Recognising the need to attract increased investments in road development the R&BD, Gujarat Govt have set up the Gujarat State Road Development Corporation Limited (GSRDC). R&BD has identified important roads as core road network extending over 9,000 km. It also defined the corridors of movement which are designated to act as catalyst for achieving the targeted economic development of the state. The state also formulated a private sector policy in the road development and identified corridors for posing under the PPP/PSP. In this context the GSRDC has identified three high density corridors namely Rajkot Jamnagar Vadinar Road, Ahmedabad Viramgam Halvad Maliya and Halol Godhra Shamalaji for capacity augmentation by converting them from existing two-lane to four-lane divided carriageway roadway. Gujarat Govt seeked assistance from Govt of India under the Viability Gap Funding for these selected road projects, which could not be implemented earlier, to meet growing travel demand on the road system of Gujarat. The practical aspect of the Viability Gap Funding Scheme will be better understood by these Case Studies. These Case studies are the very first projects in the highway sector to be taken into this scheme in Gujarat. The Main Case Study is done on Rajkot-Jamnagar-Vadinar Road Project (RJVRP), being constructed on SH-25. It is the four laning paved shoulder project over the existing two lane State Highway 25, starting from Rajkot, and traverses through Dhrol, Falla, Jamnagar city, Reliance refinery and ends at Vadinar Port. For financial analysis comparison, another Case Study is taken, the Ahmedabad-Viramgam-Maliya Road Project. This is being constructed on SH-7 and 17, connecting Ahmedabad to Maliya, via Viramgam.
DATA COLLECTION
3.2 DATA COLLECTION METHODOLOGY
DATA COLLECTION
PRIMARY DATA COLLECTION
SECONDRY DATA COLLECTION
INTERVIEWS At GSRDC (4 Persons) At GIDB (2 persons) At L&T- ECC (6 Persons)
QUESTIONNAIRES To the Client To the Concessionaire To End Users
Newspapers Magazines
Reports Manuals Thesis Tender Documents Contract Documents Project Reports Feasibility Studies
Websites
Figure 3.1 DATA COLLECTION METHODOLOGY
DATA COLLECTION
3.3 PROJECT DETAILS
Name of Project Type Description
: : :
Rajkot-Jamnagar-Vadinar Road Project Infrastructure (Road) Construction of additional 2 lane for the RajkotJamnagar-Vadinar (RJVRP) under Viability Gap Funding Scheme of Government of India on BOT Basis Road Passenger and freight transportation Gujarat State Road Transport Corporation (GSRDC) L&T Rajkot Jamnagar Tollways Pvt. Ltd 20 Years L&T ECC Division (Not Appointed) LASA appointed as proof Consultant Feed Back Ventures Sheladia Associates Mott. McDonalds Pvt. Ltd. 866.49 Crores 131.3 Km 21-10-2009 820 days 91-1-2012
End use of Project Owner Concessionaire Concession Period Contractor Independent Consultant PMC Design Consultants Safety Consultant Contract Value Length of Stretch Project Start Date Est. Construction Period Project Completion Date :
: : : : : : : : : : : : :
DATA COLLECTION
3.4 LOCATION MAP
Fig 3.2 LOCATION MAP OF CASE STUDY
DATA COLLECTION
3.5 TRAFFIC DATA
o Traffic Survey Locations

For the evaluation of the traffic and travel characteristics on the project corridor from km 3/000 to km 125/500 (Rajkot to Vadinar) of SH-25, the total stretch has been segmented into homogeneous sections, based upon the major intersections that act as main collectors or distributors of traffic along the project corridor. These identified major interactions were taken as the base for the traffic study.
Location
Chainage
Survey Detail Traffic Volume
Survey Duration 7 Days 1 Day 1 Day 7 Days 3 Days 7 Days 1 Day
Near Paddhari
At 23/000 km Origin Destination Axle Load
Kizadia Bus Stop Near RTO Check Post Sikka Bus Stop
At 78/500 km At 94/000 km At 111/000 km
Traffic Volume Traffic Volume Traffic Volume Origin Destination
Table 3.1 TRAFFIC SURVEY DETAIL
o Traffic Volume Levels -2006

The average daily traffic volume levels recorded by sections on project corridor were converted annual average traffic volume levels9. The base year traffic levels are as given under:
DATA COLLECTION
Table 3.2 AVERAGE DAILY TRAFFIC VOLUME (ADT IN VEHICLES)
Table 3.3 ANNUAL AVERAGE DAILY TRAFFIC VOLUME (AADT IN VEHICLES AND PSUs)
Page 23
DATA COLLECTION
Table 3.4 TRAFFIC COMPOSITION
Table 3.5 PEAK HOUR SHARE OF TRAFFIC
Page 24
DATA COLLECTION
Table 3.6 TRAFFIC VOLUME - SALIENT FEATURES
Page 25
DATA COLLECTION
Traffic composition (Table 3.4) reveals that goods traffic share vary from 35% to 45% or even more. It is evident from PCU factor derived. The peak traffic share was observed to be varying very marginally by sections. It is observed to be about 6.5% across the study sections (Table 3.5).
Traffic Design Pattern

The Origin-Destination survey data was analysed. The trip ends were seen with respect to immediate influence area zones, traffic originating and terminating within Gujarat state and traffic which has one of the trip ends (either origin or destination) outside Gujarat. The mode wise break-up of trips internal to Gujarat and external (to and from Gujarat) is given at Table 3.7. The desire line diagrams shown in Figure 3.3 and Figure 3.4 suggest very high proportion of tollable traffic amongst the tollable modes.
Table 3.7 BREAK UP OF TRIPS INTERNAL AND EXTERNAL TO GUJARAT
DATA COLLECTION
Fig 3.3 RAJKOT-JAMNAGAR-VADINAR PESSANGER DESIRE LINE
Prithviraj Gohil (2405) University
Page 29 B. Tech (Civil Construction), CEPT
DATA COLLECTION
Fig 3.4 RAJKOT-JAMNAGAR-VADINAR FREIGHT TRAFFIC DESIRE LINE
Page 30 B. Tech (Civil Construction), CEPT
DATA COLLECTION
Traffic Growth Rates

The traffic volume by sections is forecasted by growth rate approach. The growth rates considered are moderate.
Mode
Scooter/ Moter Cycle Auto Rickshaw/ Chakda Car/ Jeep (OT) Car/ Jeep (NT) Mini Bus Standard Bus Tempo/ LCV 2- Axle Truck 3- Axle Truck MAV Tractor with Trailer Tractor without Trailer Cycle Cycle Rickshaw Animal Drawn Others
2006-10
2.1 2.5 2.8 3.5 2.8 4.0 2.5 2.7 3.0 3.2 0.4 0.4 1.6 0.4 0.4 1.8
2010-15
2.8 2.9 3.4 4.2 2.2 3.2 2.8 3.0 3.3 3.6 0.4 0.4 1.9 0.5 0.4 2.1
2015-20
3.2 2.9 3.4 4.2 2.0 2.8 3.4 3.6 4.0 4.3 2.5 2.5 1.9 0.5 0.4 2.1
2020-25
3.5 3.4 3.9 4.9 2.0 2.8 3.4 3.6 4.0 4.3 2.5 2.5 2.2 0.6 0.5 2.5
Table 3.8 TREND BASED GROWTH RATES
3.6 PROJECT COSTS
As mentioned before, it is a four laning of an existing two lane project. As per the contract conditions, it involves repair of existing two lane structure and construction of additional two lane. Therefore, after discussions with the GSRDC, following schemes were adopted:
Profile correction with BM Average 50mm thick Overlay DBM 80mm, BC 40mm
Design of Structures
The new structures were proposed similar to that of GSHP. Based on these, rates adopted for various structure items are:
DATA COLLECTION
Table 3.9 UNIT RATES OF STRUCTURES
DATA COLLECTION
Fig 3.5 LOGISTIC MAP OF THE CORRIDOR
S. No.
1 2 3 4 5
Structures
Pipe Culverts Box / Slab Culverts Minor Bridges Major Bridges ROB's
Quantity
152 56 42 3 2
Table 3.10 STRUCTURE DETAILS ON THE CORRIDOR
Page 31
DATA COLLECTION
Overall Civil Cost

The schedule of rates of the National Highway Rajkot Division (NHRajkot), was used for estimating cost of the project. Wherever required, the escalation was applied, also for some of the items realistic rates were evaluated and used. Based on these, the base year construction costs were worked out. They are as follows:
S. No.
1 2 3 4
Description of Item
Highway Cost Intersections, Toll Plaza, Bus Bay/Bus Shelter Structure Cost Existing Road Maintenance Total
Total Amount (in Crore Rs.)

284.68 39.89 142.9 3.278 470.76
Table 3.11 TOTAL CONSTRUCTION COST
o
S. No.
1 2 3 4
Total Project Cost

Type of Cost
Civil Construction Cost Contingency (10%) Construction Supervision (3%) Inflation During Constriction (15%) Total

470.76 47.08 15.54 70.84 604.22
Table 3.12 TOTAL PROJECT COST
Maintenance Cost
Routine Maintenance Rs. 40,000/km (Annual) Periodic Maintenance Rs. 3,00,000/km (Every 5 years)
DATA ANALYSIS
4.1 INTRODUCTION
The viability of any infrastructure project depends on the following things: The ability of the state's economy to finance and sustain the created infrastructure. The ability of the state Government to support the development of projects through financial and/or policy supports. The amount of Return on Investment (RoI). The yearly return, when calculated on the total investment needed for the project, tells us about the Return on Investment. The simple rule to assess the viability is that the RoI must be greater than the cost of investment.
4.2 COST OF PROJECT
Favourable Options/Scenarios
Based on the obtained data, the financial analysis of the project has been undertaken to assess the viability of the projects under a commercial format. However, in order to justify the financial viability
DATA ANALYSIS
of the project, the corridor is broken down into number of possible options/scenarios. Each of the scenarios is assessed for its financial viability individually and in combination. The following scenarios have been considered for undertaking the financial analysis:
Scenario 1: Rajkot Jamnagar Vadinar as one corridor (126km) Scenario 2: Rajkot Jamnagar Vadinar as one corridor with an extra road spur of about 5 km; (126km +5km) Scenario 3: Rajkot to start of Jamnagar bypass (75.2km) Scenario 4: Jamnagar Bypass to Vadinar (50.8km)
Scenario 1
In this Scenario, the total length of the project is reduced by 5 (Five) Km, making it 126 Km. The Spur road, or the portion of the road that lies on the Rajkot Bypass is not taken into consideration. The portion was initially not a part of the project when it was first proposed by GSRDC. It is not a part of the original SH-25 and was later added as individually that project was completely financially non viable, even with any amount of grants. No Toll Plaza is to be constructed on that route. However, it contains certain big structures that make the construction of the road a costly affair for the State Govt. Removing that portion will not make any difference to the toll collection but will reduce the cost of the overall project, making is economically more viable.
Overall Civil Construction Cost

Rates Adopted: The schedule of rates 17 of the National Highway Rajkot Division (NHRajkot) were used for estimating cost of the project. Where required escalation was applied, also for some of the items realistic rates were evaluated and used.
S. No.
1 2 3 4
Description of Item

273.82 38.37 124.02 3.15 439.36
Table 4.1 TOTAL CONSTRUCTION COST SCENARIO 1
DATA ANALYSIS
S. No.
1 2 3 4
Total Project Cost Type of Cost


439.36 43.95 14.5 66.12 536.91
Table 4.2 TOTAL PROJECT COST SCENARIO 1
Maintenance Cost
Maintenance cost will be applied for the operation period only. The total concession period includes the time for construction as well as operation. The projected construction time, as mentioned before, is 820 days (2.25 Years). The Periodic Maintenance cost will be calculated after every 5 Years after the completion of the construction. Hence, the total No. of Periodic maintenance cycles will be 3 (Three)
Total Cost by the completion time

Project Cost (Rs. 536.91 Crore) Routine Maintenance Cost (Rs. 40,000 p.a./Km) No. of Years (Operation Period) = Concession Period Construction Period) No. of Years = 20-2.25 = 17.75 Therefore the Cost is = Rs. 40,000 p.a. * 126 Km * 17.75 Years = Rs. 8,94,60,000
Periodic Maintenance Cost (Rs. 3,00,000 every 5 Years) No. of maintenance Cycles = 3 Therefore the Cost is = Rs. 3,00,000 * 126 Km* 3 Cycles = Rs. 11,34,00,000
Therefore total Cost in Scenario 1 = Rs. 584.2 Crore
Scenario 2
In this scenario, the total road stretch is taken as per the original project.
DATA ANALYSIS

S. No.
1 2 3 4
Description of Item

284.68 39.89 142.9 3.278 470.76
S. No.
1 2 3 4


470.76 47.08 15.54 70.84 604.22
Maintenance Cost

Project Cost (Rs. 604.22 Crore)
DATA ANALYSIS
Routine Maintenance Cost (Rs. 40,000 p.a./Km) No. of Years (Operation Period) = Concession Period Construction Period) No. of Years = 20-2.25 = 17.75 Therefore the Cost is = Rs. 40,000 p.a. * 131 Km * 17.75 Years = Rs. 9,30,10,000
Periodic Maintenance Cost (Rs. 3,00,000 every 5 Years) No. of maintenance Cycles = 3 Therefore the Cost is = Rs. 3,00,000 * 131 Km* 3 Cycles = Rs. 11,79,00,000
Scenario 3
In this Scenario, the Project will only be from Rajkot to the start of the Jamnager Bypass. This project lies entirely on the SH-25 only. The significance of this project is not there if it is taken individually as the whole corridor is required to be developed. However, the idea here is that if the corridor is broken down into one or more smaller projects, each given out separately to different bidders, the viability of them individually may be more than the viability of the corridor as a whole. In addition to that, it has some other advantages as follows: Smaller projects will be easier to manage and maintain. Due to the overall amount of capital investment reduced, smaller and local bidders and also apply. This will in turn reduce the cost of mobilisation and initial field work for establishing base. Easier to monitor by the Govt.

S. No.
1 2 3 4
Description of Item

163.42 22.9 74.58 1.88 262.78
DATA ANALYSIS
S. No.
1 2 3 4


262.78 26.28 7.88 39.42 337.28
Maintenance Cost

Project Cost (Rs. 337.28 Crore) Routine Maintenance Cost (Rs. 40,000 p.a./Km) No. of Years (Operation Period) = Concession Period Construction Period) No. of Years = 20-2.25 = 17.75 Therefore the Cost is = Rs. 40,000 p.a. * 75.2 Km * 17.75 Years = Rs. 5,34,00,000
Periodic Maintenance Cost (Rs. 3,00,000 every 5 Years) No. of maintenance Cycles = 3 Therefore the Cost is = Rs. 3,00,000 * 75.2 Km* 3 Cycles = Rs. 6,77,00,000
DATA ANALYSIS
Scenario 4
In this Scenario, the Project will only be from Jamnagar Bypass to Vadinar Port. It will include the Jamnagar Bypass. This project also lies entirely on the SH-25 only. As for the previous project, the significance of this project is not there if it is taken individually as the whole corridor is required to be developed.

S. No.
1 2 3 4
Description of Item

110.39 15.47 49.44 1.27 176.58
S. No.
1 2 3 4


176.58 17.66 5.3 26.49 226.64
Maintenance Cost
DATA ANALYSIS

Project Cost (Rs. 226.64 Crore) Routine Maintenance Cost (Rs. 40,000 p.a./Km) No. of Years (Operation Period) = Concession Period Construction Period) No. of Years = 20-2.25 = 17.75 Therefore the Cost is = Rs. 40,000 p.a. * 50.8 Km * 17.75 Years = Rs. 3,60,68,000
Periodic Maintenance Cost (Rs. 3,00,000 every 5 Years) No. of maintenance Cycles = 3 Therefore the Cost is = Rs. 3,00,000 * 50.8 Km* 3 Cycles = Rs. 4,57,20,000
DATA ANALYSIS
4.3 TRAFFIC FORCAST
Traffic Composition
From the Traffic Study Data, the traffic composition was found out. The traffic Composition is as follows:
Traffic Composition
1% 4% 1% 25% 26% Sc/Mc Au Ric/Chakda Car/Jeep (Old) Car/Jeep (New) Mini Bus 6% 5% 20% 2% 1% 9% Std. Bus Tempo/LCV 2-3 axle Truck 3 M. axle Truck Tractor Others
Figure 4.1 TRAFFIC COMPOSITION SURVEY

Now, as per the Traffic Composition Survey, the we will be able to assess the type of traffic encountered in the project corridor. The Traffic, as we see, mainly consists of the Cars/Jeeps, 2 Axle 2-3 Truck and 2 wheelers. Now, as per the Annual Growth Rates projected based on the findings of updated SOS by GSHP, the Rates traffic is predicted for the entire concession period of the project. fic
DATA ANALYSIS
Table 4.9 ANNUAL TRAFFIC FORCAST (RAJKOT TO JAMNAGAR BYPASS)
Table 4.10 ANNUAL TRAFFIC FORCAST (JAMNAGAR BYPASS TO VADINAR)
Page 43
DATA ANALYSIS
4.4 REVENUE GENERATION (TOLL)
Toll Rates
The toll rates are those which have been recommended by the Ministry vide a notification in the year 1997. These have been escalated to prices as on 31 March 2006. The per km toll rates as per the escalation have been given in Table 4.9. The toll rates have also been calculated for the various project corridor scenarios.
st
Mode
Toll Rate (Rs./ Km)

0.61 1.07 2.13 1.07 2.13 3.43
Toll Rates (Rs./ Trip) Rajkot-Jamnagar- Rajkot to start of Jamnagar Bypass Vadinar Jamnagar Bypass to Vadinar
75 135 270 135 270 435 45 80 160 80 160 260 30 55 110 55 110 175
Car/Jeep Mini Bus Bus LCV 2-Axle Truck MAV
Table 4.11 TOLL RATES

For future, the toll rates have been assumed to increase at an inflation rate of 5% p.a. For estimation of corridor level toll rate, this has been rounded to nearest five rupee.
Similarly, the toll rates are calculated for the entire Concession Period as follows:
DATA ANALYSIS
Table 4.12 TOLL RATES/TRIP (RAJKOT TO JAMNAGAR BYPASS)
Table 4.13 TOLL RATES/TRIP (JAMNAGAR BYPASS TO VADINAR)
Page 45
DATA ANALYSIS
4.5 FINANCIAL ANALYSIS

After the financial analysis of the four Scenarios, the outcome achieved was as follows:
S. No.
Parameters (All amounts in Rs. Crore)
Scenario-1 RajkotJamnagarVadinar
Scenario-2 RajkotJamnagarVadinar with Spur road

625.31 448.22 177.09 28% 126.49 50.5
Scenario-3 Rajkot to start of Jamnagar Bypass

349.38 198.66 160.71 40% -
Scenario-4 Jamnagar Bypass to Vadinar
1 2 3 4 5 6
Total Project Cost Revenue Generation Viability Gap % of Total Cost Central Govt State Govt
584.2 448.22 135.98 24% 113.32 22.66
234.82 249.53 -
Table 4.14 FINANCIAL ANALYSIS
CONCLUSION
5.1 CONCLUSION OF STUDY
o Results of Calculations
From the above calculations, the following was concluded: The project corridor connecting Rajkot to Vadinar via Jamnagar bypass is a commercially viable proposition only after the implementation of the Viability Gap Funding Scheme. The project was initially launched by GIDB in 2002-03 and was not implemented due to the lack of funds. Even today, the Govt. funding alone is not enough for the project to be feasible. Neither it is still lucrative enough to be taken for Full fledged BOT project. The different Scenarios adopted for study are discussed separately below:
Scenario 1
Advantages - It appears to be the most financially viable option of all. The Viability Gap
Fund required in this case is only 24%. The project meets the requirements for the Viability gap Funding Scheme and can be taken as a commercially viable proposition.
Disadvantages - However, the Spur road, from Rajkot bypass is being neglected here and
it cannot be constructed individually under PPP framework.
CONCLUSION
Scenario 2
Advantages - It is also a commercially viable solution and fulfils the requirements for the
Viability Gap Funding Scheme. The fund required in this case is 28%. A major advantage of this scenario is that it takes care of the Spur road.
Disadvantages The Viability Gap Fund is more than the earlier Scenario
Scenario 3
Advantages Disadvantage - The Scenario is not commercially viable even after applying the Funding
Scheme. A grant of maximum 40% can be availed for any infrastructure project. Even after full grant, the project is not becoming economically viable.
Scenario 4
Advantages - The project is the most viable solution individually. It does not require any
Funding.
Disadvantages - However, the whole corridor is not developed as the other portion
becomes financially non viable. The project corridor needs to be developed at the same time. Only one section getting developed will not result in full traffic realisation.
Therefore, Scenario 2 is the most feasible option for the current project corridor.
FUTURE SCOPE
6.1 FUTURE SCOPE OF STUDY
The Viability Gap Funding Scheme can be applied in almost all Infrastructure sectors. The Scheme cannot just be limited to Public Private Partnership Projects, but can be adopted by private organisations also for large scale work like construction of townships. The Scheme can be applied parallely with the SPV Model also. The Govt. can also earn back the portion of the money invested.
BIBLIOGRAPHY
21. P.W.C. Countries Scenario in financing PPP Projects, Aug 2010. 22. Vibrant Gujarat 2011, Port Led Development, 2011.
References
1. Road & Building Department. Enhancing Connectivity between DFC, DMIC, Ports and Indistrial cluster, April 2010. Dept. of Economic Affairs, Ministry of Finance, Govt. of India. Approach paper on defining Public Private Partnership, Feb 2010. Secretory for the committee on Infrastructure, Planning Commission, Govt. of India. Financial Support to Public Private Partnership in Infrastructure, 2006 Dept. of Economic Affairs, Ministry of Finance, Govt. of India. Position Paper on the Road Sector in India, July 2009 C. R. Bennet and R. R. Allen. Gujarat State Highway Project Report, lpcb.org CARE Rating, CARE Credit Rating Ltd. Patrick Riley, Infosis. Economic feasibility Analysis, 2004 The World Bank, Opening the Rural HinterlandsGujarat State Highway. S. Bhatnagar, eGovernance Advisor, World Bank. Indian national eGovt plan focus on service delivery. Gujarat State Road Development Corporation. Introduction to PPP. IRC-108:1996. Guidelines for Traffic prediction on Rural Highways Dept. of Economic Affairs, Ministry of Finance, Govt. of India. Schemes for Support to Public Private Partnership in Infrastructure, July 2005. Lea Associates Pvt. Ltd. Revalidation Study of Rajkot-Jamnagar-Vadinar Corridor, 2006 Larsen & Toubro ECC Division. Monthly Progress Report of Rajkot-Jamnagar-Vadinar road Project. Larsen & Toubro Rajkot-Jamnagar-Vadinar Tollways Pvt. Ltd. Concession Agreement, 2006. A. K. Mangotra, Additional Secretory, Dept of Commerce, New Delhi. Minutes of Empowered Committee, Export Development Fund for North East Region. A. K. Jyoti, Chief Secretary, Govt. of Gujarat. Gujarat, the Global Business Hub. Asian Development Bank. National Highway Corridor (Sector) I Project. J. O. Ryan, Stanford University. Project Viability Screening. Industries Commissionerates . Panchmahals 23. S. Vasudevan. Public Private Partnerships Today, 2004 24. Secretory. Dept. of Economic Affairs, Ministry of Finance, Govt. of India. Financial Support to Public Private Partnership Recent GoI Initiatives, may 2006. 25. CRISIL Research. Roads and Highways, Aug 2009. 26. GSRDC. Invitations for Proposals - RajkotJamnagar-Vadinar Road Project on BOT (VGF) Basis, 2006 27. Asian Development Bank. Republic of Philippines Road Sector Improvement Project, Feb 2011. 28. A. K. Chaudhary, IIM Ahmedabad. A Report on Road Sector in India, 2001. 29. Dept. of Economic Affairs, Ministry of Finance, Govt. of India. Standardization of PPP Contract provisions in India, Oct 2009. 30. IndiaBudget.nic.in, VGF Guidelines. 31. Pppinindia.com, Current Status of projects under VFG Scheme.
2.
3.
4.
5. 6. 7. 8. 9.
10. 11. 12.
13. 14. 15. 16.
17. 18. 19. 20.
Page 51
ANNEXURES
STRUCTURE COST - SCENARIO 1

Type of Structure Major Bridge Minor Bridge ROB Box/Slab Culvert Pipe Culvert (Single Row) Quantity 2 41 2 56 148 Length/Area 6048 384 6300 192 24 Total Length/Area 12096 15744 12600 10752 3552 Cost/Unit 26000 24000 26000 18000 7500 Total Cost 314496000 377856000 327600000 193536000 26640000
Annexure 1 STRUCTURE COST CALCULATION SCENARIO 1

Type of Structure Major Bridge Minor Bridge ROB Box/Slab Culvert Pipe Culvert (Single Row) Quantity 3 42 2 56 152 Length/Area 6240 390.48 6300 192 24 Total Length/Area Cost/Unit 18720 26000 16400.16 24000 12600 26000 10752 18000 3648 7500 Total Cost 486720000 393603840 327600000 193536000 27360000

Type of Structure Major Bridge Minor Bridge ROB Box/Slab Culvert Pipe Culvert (Single Row) Quantity 1 19 2 22 62 Length/Area 6000 384 6300 192 24 Total Length/Area Cost/Unit 6000 26000 7296 24000 12600 26000 4224 18000 1488 7500 Total Cost 156000000 175104000 327600000 76032000 11160000
Page 52
B. Tech. (Civil Construction), CEPT
ANNEXURES

Type of Structure Major Bridge Minor Bridge ROB Box/Slab Culvert Pipe Culvert (Single Row) Quantity 1 22 0 34 86 Length/Area 6096 384 6300 192 24 Total Length/Area Cost/Unit 6096 26000 8448 24000 0 26000 6528 18000 2064 7500 Total Cost 158496000 202752000 0 117504000 15480000
CONSTRUCTION COSTS CALCULATION

Scenario Costs Highway Cost Existing Road Maintenance Intersections, Toll Plaza, Bus Bay/Bus Shelter Highway Cost Existing Road Maintenance Intersections, Toll Plaza, Bus Bay/Bus Shelter Highway Cost Existing Road Maintenance Intersections, Toll Plaza, Bus Bay/Bus Shelter Highway Cost Existing Road Maintenance Intersections, Toll Plaza, Bus Bay/Bus Shelter Cost per Km 21731297.71 250229 Total Km 126 126 Total Cost 2738143511 31528854
3045038.17 21731297.71 250229
126 131 131
383674809.2 2846800000 32779999
3045038.17 21731297.71 250229
131 75.2 75.2
398900000 1634193588 18817220.8
3045038.17 21731297.71 250229
75.2 50.8 50.8
228986870.2 1103949924 12711633.2
3045038.17
50.8
154687938.9
Annexure 5 CONSTRUCTION COST CALCULATION
Page 53
ANNEXURES
OVERALL COST CALCULATION OF DIFFERENT SCENARIOS

Scenario 1 Maintenance Routine Maintenance Periodic Maintenance Routine Maintenance Periodic Maintenance Routine Maintenance Periodic Maintenance Routine Maintenance Periodic Maintenance Km 126 126 131 131 75.2 75.2 50.8 50.8 Years/ Cycle 17.75 3 17.75 3 17.75 3 17.75 3 Basic Costs p.a. 40000 300000 40000 300000 40000 300000 40000 300000 Total Maint. Cost 89460000 113400000 93010000 117900000 53392000 67680000 36068000 45720000 Project Cost 5639100000 Overall Cost 5841960000
6042200000
6253110000
3372750000
3493822000
2266400000
2348188000
Annexure 6 FINAL COST CALCULATION
Page 54

Viability Gap Funding For PPP Projects in BOT Highway Sector

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ACKNOWLEDGEMENT

Prithviraj Gohil (2405)

B.Tech (Civil Construction), CEPT University

INDEX CHAPTER - 1 INTRODUCTION

CHAPTER - 2 LITERATURE STUDY

CHAPTER 3 DATA COLLECTION

CHAPTER 4 DATA ANALYSIS

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CHAPTER 6 FUTURE SCOPE

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Length (in km)

Table 1.1: ROAD LENGTH DATA

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Table 1.2 CHANGE IN TREND OF ROAD TRAFFIC

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1.2 NEED FOR STUDY

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1.4 RESEARCH METHODOLOGY

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MANUAL EVALUATION BY FACTS PROBABILISTIC APPROACH

COMMENTS, SUGGESTIONS AND CONCLUSION

Figure 1.1 RESEARCH METHODOLOGY

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Geographical o Case Study of above mentioned projects.

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2.2 PUBLIC PRIVATE PARTNERSHIP

Understanding Public Private Partnership (PPP) Projects

Why we need to define PPPs?

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Why we need PPPs?

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B. Tech (Civil Construction), CEPT University

Salient features of PPP

Prithviraj Gohil (2405)

Page 10 B. Tech (Civil Construction), CEPT University

Exclusions from PPP

Public Private Partnership Projects in various Sectors Education

Fig 2.1 EXISTING SCENARIO OF PPP PROJECTS IN VARIOUS SECTORS IN INDIA

Eligibility of PPP Projects

Prithviraj Gohil (2405)

Page 11 B. Tech (Civil Construction), CEPT University

2.3 BUILD OPERATE TRANSFER

Understanding the Build Operate Transfer (BOT) Projects

The 3 Stages of BOT Model

Prithviraj Gohil (2405)

Page 12 B. Tech (Civil Construction), CEPT University

Benefits of BOT Model

2.4 VIABILITY GAP FUNDING

Understanding the Viability Gap Funding Scheme