Presentation at Asian Highways Investment Forum. Performance based Maintenance Contracts for Highways

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based Maintenance Contracts for Highways By Atul Kumar Chief General Manager,

1 Presentation at Asian Highways Investment Forum Bangkok, 8-9, October 2013 United Nations Economic & Social Commission For Asia & The Pacific Performance based Maintenance Contracts for Highways By Atul Kumar Chief General Manager, National Highways Authority of India 1

2 Indian Road Network Total Length 4.3 Million km Length (km) National Highways 82,891 Expressways 200 State Highways 1,54,500 Major District Roads 4,67,763 Rural Roads 26,50,000 Roads carry 85 % of passenger & 70 % of freight traffic National Highways constitute only 2% of length, but carry 40% of the traffic on Indian Roads. NHDP-Worlds largest PPP road development program NHAI has completed 21,165 km and is presently developing another 12,348 km of NHs. 222 Contracts are under implementation. All seven phases of NHDP will cover km and non NHDP will cover 1050 km. 2

4 Riding quality of pavement Safety of Road Users Protection of Highway property Economic maintenance Traffic Management Incident Management Making journey comfortable Revenue generation 4

5 Riding Quality of pavement Bumps within specified limits & Periodic overlay Preventive maintenance e.g. crack sealing, joint filling, edge repair,prompt repair etc. Safety of Road Users Engineering improvement & FOBs & Underpasses Adequate signage & Light barrier in median (plantation) Lane markers, Kerb Markers, Crash Barriers 5

6 Protection of Highway property Check encroachment & overloading and Round the clock patrolling. Economic maintenance Periodic evaluation of pavement condition & Renewal design based on technical evaluation of pavement structure Traffic Management Minimizing obstructions and travel time, Lane driving & Speed limit 6

7 Incident Management Ambulance Service, Route Patrol Service, Tow Away Crane Service & Assistance in distress viz. help to broken down vehicle, flat tyre replacement etc. Making Journey Comfortable Provision of structured wayside amenities, Bus lay bays/ Truck lay bays, Minimum stop overs at toll plazas Revenue Generation 7

8 Public Funded Projects O&M through contracts to be supervised by Consultants (short term on item rate basis). Toll collection through another agency. Being transfered to performance based Maintenance of Contracts Operation, Maintenance and Transfer (OMT) BOT (Annuity) Projects O&M by Concessionaire (long term on performance basis) Toll collection through another agency. BOT (Toll) Projects Both O&M and toll collection by Concessionaire (long term on performance basis). 8

9 Mode Completed Contracts No. Length BOT (Toll) 56 3,396 BOT (Annuity) 21 1,145 OMT 18 2,770 Total

10 Requirements specified in Schedule to the Model Concession Agreements with penalties which are to be invoked on recommendations from Independent Engineer. Illustrative list on the road part : Nature of Defect or Deficiency Carriageway and paved shoulders Breach or blockade Roughness value exceeding 2,500 mm in a stretch of 1 km (as measured by a standardized rough meter/bump integrator) Pot holes Cracking in more than 5% of road surface in a stretch of 1 km Rutting exceeding 10 mm in more than 2% of road surface in a stretch of 1 km (measured with 3 m straight edge) Raveling/Stripping of bitumen surface exceeding 10 sq m Damage to pavement edges exceeding 10 cm Hard/earth shoulders, side slopes, drains and culverts Variation by more than 2% in the prescribed slope of camber/cross fall Time Limit for Repair/Rectification Temporary/ restoration of traffic within 24 hours, permanent restoration within 15 days 180 days 48 Hrs 30 days 30 days 15 days 15 days 30 days Variation by more than 15% in the prescribed side (embankment) slopes 30 days 10

11 Assuring the Road User of adequate service quality Cost Effective operation of highways Developing O&M as an industry through Public Private Partnership. Operation, Maintenance and Tolling through same agency. 11

12 Three Critical Elements for financial viability determination Traffic volume, User fee and O&M cost Concession Agreement follows Output Specifications Concession Period based on Periodic Maintenance Cycle of the Project Highway :[6 to 9 years] Concessionaire selection by Highest Annual Concession Fee offered for 1 st year with annual increment of 10%- Payment in monthly installments within 3 days of close of the month Comprehensive Risk Allocation between parties Provision for Major Maintenance Works and other facilities if necessary All financial inflows (toll revenue) and outflows through Escrow Account to provide enhanced security to lenders 12

13 Permitted Debt & Equity Ratio: 70 :30 Technical Capacity: The Applicant shall, over the past 5 (five) financial years preceding the Application Due Date, have: paid for, or received payments for, construction of EPC Project(s); and/ or paid for development of PPP Project(s) and/ or collected and appropriated revenues from PPP Project(s), such that the sum total of the experience score is more than the indicated project cost Provided that at least one fourth of the Threshold Technical Capability shall be from the Highway Projects Financial Capacity: The Applicant shall have a minimum Net Worth (the Financial Capacity ) equivalent to 25% of the indicated project cost at the close of the preceding financial year. 13

14 The technical parameters mainly focused on output specifications Only Core Requirements (Project Facilities) defined like service road, toll plaza/medical and ambulance facilities Concessionaire to innovate & add value i.e.) Road safety OMT Concession Agreement contains 40 Articles and; 15 Schedules A to O 14

15 Role and functions of the Independent Engineer Review Drawings and Documents within 15 days & modified if any within 7 days Review, inspection and monitoring of Construction Works, quality assurance procedures within 15 days Conducting tests on completion of construction (10% of no. of tests prescribed in Quality Control Manual) and issuing Completion Certificate Review, inspection and monitoring of O&M; Review, inspection and monitoring of Divestment Requirements; Assisting the Parties in resolution of disputes; and Undertaking all other duties and functions in accordance with the Agreement. Determination of costs and time Determine the costs and their reasonableness if required Determine the period or any extension thereof Assistance in Dispute resolution Miscellaneous Notify its programme of inspection to the Authority and to the Concessionaire Copy of all communications, comments, instructions, Drawings or Documents to be communicated to the Authority 15

16 Termination Payments Force Majeure For Non-Political Event: an amount equal to 50% of Debt Due less Insurance Cover Indirect Political Event: an amount equal to Debt Due[Act of war/strike/political agitations] For Political Event: an amount equal to Debt Due + 60 times the Average Daily Fee (Change of law /compulsory acquisition in National interest) Termination Due to Concessionaire's event of Default An amount equal 50% of Debt Due Termination Due to NHAI event of Default An amount equal to Debt Due + 60 times the Average Daily Fee 16

17 OMT-WIN-WIN SITUATION Costly / Prime National Asset maintained by tapping \Private Sector efficiency. Asset after up gradation and proper maintenance return back to the Govt. No Toll/Revenue leakages Average cost of construction of a 4-lane highway 8 crore Length under OMT (Contract) Total Project Cost (TPC) for maintenance and upgradation (6 to 9 year ) Firm s revenue for the first year year over year) Total (Crores) Per km. (Lakhs) Total (Crores) 1 st Year per km. (Lakhs) 2,770 km. (18 nos.) US$ = Rs

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COST BENEFIT ANALYSIS OF CHENNAI PERIPHERAL ROAD

COST BENEFIT ANALYSIS OF CHENNAI PERIPHERAL ROAD 1 Introduction The objective of the cost benefit economic analysis is to identify and quantify the benefits and costs associated with the project. This