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

Email: atulkumar@nhai.org/atulkumar55@gmail.com

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Length (km)

National Highways 82,891

Expressways 200

State Highways 1,54,500

Major District Roads 4,67,763

Rural Roads 26,50,000

Total Length – 4.3 Million km

• 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 54478 km and non NHDP will cover 1050 km.

Indian Road Network

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Riding quality of pavement

Safety of Road Users

Protection of Highway property

Economic maintenance

Traffic Management

Incident Management

Making journey comfortable

Revenue generation

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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

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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 structureTraffic Management

Minimizing obstructions and travel time, Lane driving & Speed

limit

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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

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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) ProjectsO&M by Concessionaire (long term on performance basis) Toll collection through another agency.

BOT (Toll) ProjectsBoth O&M and toll collection by Concessionaire (long term on performance basis).

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Mode Completed Contracts

No. Length

BOT (Toll) 56 3,396

BOT (Annuity) 21 1,145

OMT 18 2,770

Total 95 7311

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Nature of Defect or Deficiency Time Limit for Repair/Rectification

Carriageway and paved shouldersBreach or blockade Temporary/ restoration of traffic within

24 hours, permanent restoration within 15 days

Roughness value exceeding 2,500 mm in a stretch of 1 km (as measured by a standardized rough meter/bump integrator)

180 days

Pot holes 48 HrsCracking in more than 5% of road surface in a stretch of 1 km 30 daysRutting exceeding 10 mm in more than 2% of road surface in a stretch of 1 km (measured with 3 m straight edge)

30 days

Raveling/Stripping of bitumen surface exceeding 10 sq m 15 daysDamage to pavement edges exceeding 10 cm 15 daysHard/earth shoulders, side slopes, drains and culverts

Variation by more than 2% in the prescribed slope of camber/cross fall 30 daysVariation by more than 15% in the prescribed side (embankment) slopes 30 days 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 :

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.

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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 1st 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

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Permitted Debt & Equity Ratio: 70 :30Technical 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/ orpaid 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.

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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

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Role and functions of the Independent EngineerReview Drawings and Documents within 15 days & modified if any within 7 daysReview, inspection and monitoring of Construction Works, quality assurance procedures within 15 daysConducting 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; andUndertaking all other duties and functions in accordance with the Agreement.Determination of costs and timeDetermine the costs and their reasonableness if requiredDetermine the period or any extension thereofAssistance in Dispute resolutionMiscellaneousNotify 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

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Force Majeure For Non-Political Event: an amount equal to 50% of Debt Due less Insurance CoverIndirect 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 DefaultAn amount equal to Debt Due + 60 times the Average Daily Fee

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Termination Payments

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

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OMT-WIN-WIN SITUATION

Length under OMT (Contract)

Total Project Cost (TPC) for maintenance and upgradation (6 to 9 year )

Firm’s revenue for the first year (increased @10% year over year)

Total (Crores) Per km. (Lakhs) Total (Crores) 1st Year per km. (Lakhs)

2,770 km.(18 nos.)

1711 62 1210 44

1 US$ = Rs. 62

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