Model Concession Agreement

Model Concession Agreement for Highway Sector
1. INTRODUCTION
1.1 General
Model Concession Agreement (MCA) is the contract documents that specify the rights
and responsibilities of the Government and Private sector in PPP model.
It has been developed for private participation for the project. Model Concession
Agreement clearly lays down the principal governing risk sharing between various share
holders.
1.2 Need for Study
Infrastructure in India is witnessing a significant interest from both domestic as well as

foreign investors following the policy initiatives taken by the Government of India to PPP.
However, the inflow of investment will depends on a comprehensive policy and

regulatory framework necessary for addressing the complexities of PPP.
For sustaining private investment in up gradation and maintained of the Highway on

PPP basis, a precise policy and regularity framework is being spelt out in a Model Concession
Agreement (MCA).
1.3 Objectives
1.) To study the MCA for PPP project in highway sector.
2.) To propose the ideal framework for PPP project in Highway Sector.
1.4 Scope of Study
Road sector in India had great potential for investors. The GOI planned to set target a
building 7000 km of roads per year and would require an investment of about $70 billion in the
3-4 years.
PPP would play an important role in this programmed as about $ 40 billion was
expected from the private sector.
2. LITERATURE REVIEW
M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 1
2.1 Introduction
Model Concession Agreement (MCA) is the contract documents that specify the rights
and responsibilities of the Government and Private sector in PPP model.
It has been developed for private participation for the project. Model Concession
Agreement clearly lays down the principal governing risk sharing between various share
holders.
The highways sector in India is witnessing a significant interest from both domestic as
well as foreign investors following the policy initiatives taken by the Government of India to
promote Public Private Partnership (PPP) on various models. However, the inflow of
investment will depend on a comprehensive policy and regulatory framework necessary for
addressing the complexities of PPP (Journal of the Indian Roads Congress, April-June 2009).
For sustaining private investment in up gradation and maintenance of the Infrastructure
projects on PPP basis, a precise policy and regulatory framework is being spelt out in a Model
Concession Agreement (MCA).
This framework addresses the issues which are typically important for limited recourse
financing of infrastructure projects, such as mitigation and unbundling of risks; allocation of
risks and rewards; symmetry of obligations between the principal parties; precision and
predictability of costs and obligations; reduction of transaction costs; force majeure; and
termination.
It also deals adequately with other important concerns such as user protection;
transparent and fair procedures; and financial support from the Government.
The MCA also elaborates on the basis for commercializing highways in a planned and
phased manner through optimal utilization of resources on the one hand and adoption of
international best practices on the other. The objective is to secure value for public money and
provide efficient and cost effective services to the users.
Fig. 1 Role, Skill Requirement, and Risks of Private sector

(Source: Risk Mitigation Strategies in PPP- Projects)
2.2 Projects undertaken through PPP
A brief detail of the projects under Public Private Partnership (PPP) are as under.
2.2.1 BOT (Toll) Projects
So far 48 numbers of projects valued about Rs.9329.21 crore haven been taken
up on Built Operate and Transfer (BOT) basis (Toll based projects)
Out of this, 23 numbers of projects have been completed and 25 projects are
under progress.
2.2.2 BOT (Annuity) Projects
8 number of projects valued about Rs. 2354 crore, has been taken up on
Annuity basis of which all projects except only two, amounting to Rs. 664.30 crore are
completed.
2.2.3 Special Purpose Vehicles (SPV)
12 number of projects valued about Rs. 2339 crore have been taken up under SPV
funding
5 numbers of projects amounting to Rs. 890 crore have been completed so far.
7 numbers of projects amounting to Rs. 1449 crore are in progress on SPV basis
(Source: ministry of rod transportation and highway)

2.3 Issues in Model Concession Agreement:
2.3.1 Legal Issue

Concession Agreement
Condition Precedence
Performance Security
Obligation of Security
Obligation of Authority
Force Majeure
Suspension
Additional Toll way
2.3.2 Financial Issues
Financial Closure
Grants
Revenue Shortfall
Escrow Account
State Support Agreement
2.3.3 Technical Issues

Scope and Facilities of the Project
Monitoring and Supervision of Construction by Independent Consultants
Operation, Maintenance and Safety Requirement
(Source: Journal of the Indian Road Congress, April – June 2009)
2.4 Application of the Model
As per David Lavinson, et. all. Successful PPPs have well-defined roles that
both improve the quality and quantity of transportation and provide at least a normal profit to
private participants. They measured success across a number of criteria, including a general
assessment of the support for the project by the various stakeholders: public, government (civil
service), political, and private; looking at adherence to initial forecasts (on-time, on-budget,
demand realized); considering whether the project was extended or the parties undertook
additional projects (success breeds success); and considering more objective assessments of
whether the project served the public good.
(Source: Edward Elgar Publishers, 2006)
2.5 Improving in Concessionaire Selection
Selection of the most suitable concessionaire is critical to the success of a PPP

project. Successful selection of the most suitable concessionaire depends on a number of
issues, which include the quality of (1) the general arrangement of the selection process, (2) of
the definition of project objectives and core requirements, (3) identifying and defining project-
specific criteria, (4) the prequalification and tender evaluation methodology, (5) the
understanding of what these tenders can achieve, and (6) the negotiation skills.
An appropriate selection protocol should be followed that may incorporate
public procurement principles, a best-value-selection approach, a competitive process, and a
multicriteria prequalification and tender evaluation methodology. A number of methods have
been in practice for prequalification and tender evaluation and can be modified and combined
to suit a particular project.
Tender costs for BOT-type projects are extremely high. Interested parties should
be shortlisted before asking them to submit tenders in order to minimize overall tendering costs
in the industry. Critical successful factors and other important criteria can be coded and
classified into relevant criterion packages to facilitate evaluation.
(Source: Journal of Construction Engineering and Management, September – October 2004)
Together with the Schedules, the proposed framework addresses the issues that are
likely to arise in financing of highway projects on BOT basis. The proposed regulatory and
policy framework contained in the MCA is critical for attracting private investment with
improved efficiencies and reduced costs, aimed at accelerating growth.
(Source:Risk Mitigation Stratigies in PPP)
Currently the PPP model has not matured largely due to lack of clarity and assurances
in terms of the stakeholders interests derived from the revenue models so far developed for
roads, ports and airport projects. At a conceptual level, clarity is clearly missing in
understanding and structuring a PPP framework from a strategic, financial, tax, legal and
business perspective
PPP structures are still skewed towards the largest monopoly- the government
Ecosystem still ignores the Risk Matrix and their multiplier effect on projects and their
viability. PPPs still run more than ordinary business risks like Political Risk, Regulatory Risk,
Green-field Risk, Financial Closure Risk, Execution Risks, Feasibility Risks etc and the
interplay of this could be in geometric proportions leading to disproportionate Risk-Reward
and unfavorable investment ecosystem.
Risk capital is still averse. Large Private Equity prefer participating at grow
stage when the cash flows are visible, and the very nature of the PPPs are that they are front-
loaded with huge capital, long gestations, cash flow visibility typically after 4 to 7 years and
steady cash flows during the concession. What India needs is venture capital at preoperative
stage once the definitive agreements are signed with the government.
Many lenders have already shot over the headroom in the infrastructure space
leading to many projects facing delays in financial closures. Clearly this requires a big push

from the Ministry of Finance and RBI in terms of dedicated pipeline for funding PPPs 60
Despite all the challenges, Public Private Partnerships have become increasingly attractive as
reflected in many global infrastructure initiatives. As PPPs can also achieve social and
environmental objectives, PPPs can emerge as a major mechanism to raise the standard of
living of the society.
(Source:Risk Mitigation Stratigies in PPP)
2.6 Research Gap
From the literature survey of last one decade, it is found that there are some pitfalls
present in Legal, Financial & Technical issues of model concession agreement for Highway
Sector.
Thus present research aims to suggest new features for improving model
concession agreement for the Highway Sector.
3. DATA COLLECTION
3.1 An Overview
To fulfill the objective of the study and conclude with some effective recommendation data
collection has been done in stages. The first stage, opinion survey, is conducted to find out the
factors affecting the process of privatization and risk associated with it. As a second stage,
collecting the data for road network in India and focusing it to the state of Gujarat. Lastly
conducting a case study with the emphasis of implication of Model Concession Agreement on
the project taken on BOT concept. The data collection for the three stages mentioned above is
done for the following format.
 Opinion Survey

 Road network in India

 Detailed Case Study
3.2 Opinion Survey
3.2.1 Objective
To find out different factors, impeding the smooth implementation process in

privatization in Infrastructure project. Survey also focuses on the factors associated with the
project risk.
3.2.2 Methodology
Meeting private sector entrepreneurs and sharing experienced based information

related to the objective of the study. The factor so surveyed (on the basis of questionnaire) is
analyzed, relating it with the implication of the Model Concession Agreement in risk allocation
and Mitigation.
3.2.3 List of factors affecting the process of privatization
The factors leading to the impending execution of the project due to the risk associated
with it, according to the private sector and on the basis of questionnaire is listed Table 3.1. The
factors are not mentioned as component specific, rather taken as affecting the project as a
whole. It is the reflection of private sector from their past experience with the government and
other department of the government leading to lack of confidence for encouraging privatization
in the state of Gujarat.
Table 1 List of Factors impending to the process of Privatization

Sr No. Factors
1 Achieving FIRR on time
2 Corruption
3 Delays in land acquisition
4 Government imprudence
5 Ill chosen methods of subsidies

6 Inordinate delays
7 Interdepartmental conflicts
8 Lack of stability & clarity of policy
9 Lack of regulatory framework
10 Lack of Institutional framework
11 Lack of corporate governance
12 Lack of technical competence
13 Market distortion
14 MoA route for selection of t6he developer
15 Non economic goals
16 Non availability of domestics financial markets
17 Payment security
18 Poor interministerial coordination
19 Quality of project
20 Socio political considering
21 Underdeveloped capital markets
3.3 Detailed Case Study. (Vadodara – Halol Road Project)
The Vadodara – Halol road, which links Vadodara city to the industrial town of Halol,
is one of the important State Highway in the State of Gujarat. The strategic option study of the
state road network instituted by the Government of Gujarat in 1995, to indentify and priority to
this road section. The road & Building department, government of Gujarat (GoG), desirous of
implementing the concept of widening and strengthening of exiting State levy of toll on such
improved section, have already entered onto a Memorandum of Agreement with infrastructure
Leasing & Financial Service Limited (IL & FS) to develop advantage and implement the
widening/strengthening of the Vadodara- Halol section of the State Highway (SH 87) on a
commercial format.
3.3.1 Project Characteristics

It is project road to be strengthened and widened to 4 lanes along with the provision of
through service road, abutting the carriageway serving to d=segregate slow moving traffic and
local trips with a deferential toll rate for the main carriageway and service road.
The project road extends from the intersection of Vadodara by pass to the intersection
of the Halol Bypass and is 32 km long.

3.3.2 Project Road Description.

Vadodara – Halol road begins at km 8/300 at the intersection of SH 87 with Vadodara bypasss
(NH 8) and ends at km 40/0 at the start of Halol bypass..Following are the physical features
along the project road:
 Three major bridges:

1) Nallah (km 14/050)
2) Across Narmada Canal (km 32/600)
3) Nallah (km 36/800)
 Three minor bridges:

1) Nallah (km 23/700)
2) Zuria River (km 27/00)
3) Nallah (km32/460)
 8 intersections
 17 pipe culverts and 12 slab culverts
3.3.3 Project Cost.

The project cost for service road abutting the main carriageway , the base construction cost
comes to Rs. 935.43 millions. The abstract costing is given in Table 3.1 and the initial
expenditure as per Table 3.2
Table 2 Summary of Construction Costs.
Sr. No. Description Cost (Rs.Million)

1 Site Clearance 1.4
2 Earth Works 85.62
3 Pavement Works 440.28
4 Major and Minor Bridges 87.52
5 Junction Improvement and access 54.12
6 Road furniture 62.71
7 Toll Plaza 48.00
8 Crossing for Service Road. Including in sr. no. 6
9 CD works and drains 65.22
10 Environmental and Social Costs. 77.46

11 Cost of Shifting of Services and Other Items. 13.10

12 Base Construction Cost 935.43
Table 3 Details of Landed Project Cost
Sr Description Cost (Rs.

No. Millions)
1 Base construction cost 1.40
2 Site establishment charges @2% 85.62
3 Detailed engineering, quality control & construction 440.28
supervision charges @ 5%
4 Establishment / Pre operative 87.52
5 Insurance Charges 54.12
6 Legal mortgage 62.71
7 Financing and administrative charges 48
8 Price contingency Including in Sr
no. 6
9 Physical contingency 65.22
10 Interest during construction 77.46
11 Total Project Cost 13.10

Table 4 Expenditure Schedule (previous schedule)
Model Concession Agreement for highway Sector
Table 3.2 Expenditure Schedule (previous data)
Item Description Des’ 97- Feb- Apr- Jun- Aug- Oct- Dec’98- Feb- Apr-
Jan’98 Mar’98 May’9 Jul’98 Sep’98 Nov’98 Jan’99 Mar’99 May’99
8
Site Clearance 0.00 1.4 0.00 Rain 0.00 0.00 0.00 0.00 0.00
Earth Works 0.00 25.69 25.69 0.00 25.69 8.56 0.00 0.00 0.00
Widening & Strengthening of 0.00 0.00 36.98 0.00 73.97 36.98 92.46 92.46 36.98
Exiting pavement
New Pavement Construction 0.00 0.00 1.19 0.00 2.11 1.98 3.43 3.83 0.66
Pavement works foe lane 0.00 0.00 0.00 0.00 17.17 8.59 14.31 14.31 2.86
Changing Options
Landscaping 0.00 0.00 0.00 4.65 4.65 4.65 4.65 4.65 0.00
Construction of Cross 0.00 6.52 9.78 0.00 26.09 9.78 13.04 0.00 0.00
Drainage Works
Minor Bridges 0.00 0.44 0.88 0.00 1.79 0.88 0.44 0.00 0.00
Major Bridges 0.00 8.31 12.47 0.00 20.79 12.47 15.8 6.65 6.65
Junction Improvement and 0.00 0.00 0.00 0.00 0.00 17.52 40.89 35.03 23.37
Road furniture
Shifting of utilities and Other 26.93 40.39 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Items.
Toll Plaza and Miscellaneous 0.00 0.00 0.00 0.00 7.20 0.00 14.4 14.4 12.00
item

3.3.4 Traffic Study

Vadodara Halol road currently caters to about 18000 PCU per day very much near to capacity
of the road. The stretch of road cater to car traffic destined principally to Halol & Godhra and
truck traffic between Vadodara and Panchmahal as well as long distance traffic with
destination as Delhi, Punjab, Rajasthan and Madhya Pradesh. The preliminarily study on BOT
of three roads conducted in January 1996 gives upto date information on traffic characteristics
and flows. The traffic forecast given in table 3.3 and Toll rates given in Table 3.4
Table 5 Traffic forecast
Years Bus Truck LCV Car Two Auto

Wheeler Rickshaw
1996 597 3292 785 1657 820 113
1997 638 3600 858 1853 926 127
1998 682 3937 938 2072 1047 142
1999 729 4305 1026 2316 1183 158
2000 780 4708 1122 2590 1336 177
2001 828 5127 1222 2839 1478 194
2002 879 5583 1331 3112 1635 213
2003 934 6079 1449 3411 1808 233
2004 992 6620 1578 3739 2000 256
2005 1053 7208 1718 4098 2212 280
2006 1110 7766 1851 4445 2420 304
2007 1170 8367 1994 4882 2647 330
2008 1233 9015 2149 5230 2896 357
2009 1300 9712 2315 5673 3168 388
2010 1370 10464 2494 6154 3466 421
2011 1438 11164 2661 6584 3733 450
2012 1510 11911 2839 7044 4020 481
2013 1586 12708 3029 7537 4330 515
2014 1665 13558 3232 8063 4663 551
2015 1748 14524 3513 8789 5022 590
2016 1831 15404 3769 9443 5894 865
2017 1917 16335 4040 10138 6824 1157
2018 2007 17318 4326 10874 7815 1467
2019 2101 18358 4628 11655 8872 1795
2020 2200 19458 4948 12484 9998 2144
2021 2301 20440 5234 13276 11108 2477
2022 2407 21469 5533 14111 12286 2828
2023 2518 22547 5847 14992 13535 3199
2024 2633 23678 6176 15921 14860 3589

2025 2755 24863 6521 16901 16267 40025

2026 2755 24863 6521 17001 16267 4002
2027 2755 24863 6521 17001 16267 4002
2028 2755 24863 6521 17001 16267 4002
2029 2755 24863 6621 17001 16267 4002
Table 6 Toll Rates

Figures in Rs.
Years Bus Truck LCV Car Two Auto
Wheeler Rickshaw
1996 40 40 30 20 2 5
1997 43 43 32 22 2 5
1998 47 47 35 23 2 6
1999 50 50 38 25 3 6
2000 54 54 41 27 3 7
2001 59 59 44 29 3 7
2002 63 63 48 32 3 8
2003 69 69 51 34 3 8
2004 69 69 48 32 3 8
2005 74 74 56 37 4 9
2006 86 86 65 43 4 10
2007 93 93 70 47 5 12
2008 101 101 76 50 5 12
2009 109 109 82 54 5 14
2010 117 117 88 59 6 15
2011 127 127 95 63 6 16
2012 137 137 103 69 7 17
2013 137 137 103 69 7 17
2014 160 160 120 80 8 20
2015 173 173 129 86 9 22
2016 186 186 140 93 9 23
2017 201 201 151 101 10 25
2018 217 217 163 109 11 27
2019 254 254 190 127 13 32
2020 254 254 190 127 13 32
2021 274 274 205 137 14 34
2022 296 296 222 148 15 37
2023 320 320 240 160 16 40

2024 345 345 259 173 17 43

2025 373 373 280 186 19 47
2026 403 403 302 201 20 50
2027 435 435 326 217 22 54
2028 469 469 352 235 23 59
2029 507 507 380 254 25 63
3.3.5 Operating and Maintenance Costs.

 Annual maintenance cost is assumed at Rs. 0.25 million per kilometer at 1996 prices.
Periodic renewal is proposed at every 5 years with an asphaltic concrete layer of 40 mm
thickness. A major renewal is proposed in 2014 when in addition to the asphaltic layer,
a 50 mm dance bituminous layer is to be provided.
 Annual insurance cost is assumed at 1% of net fixed assets.
 Operating and Maintenance costs have been escalated using an annual factor of 8%.
 Toll Plaza needs to be expanded in the future to service the increased traffic volume.
Two toll booths are assumed to be added every five years conceding with the major
maintenance work. Additional booths are assumed are assumed to costs Rs. 15 lakhs
per booth on base year period.
3.3.6 Environment Clearance – An Issue

The project road alignment passes from the reserved forest under the acquisition of
central government. This risk was not envisaged at the initial stage of agreement, hence it lead
to uncertain delay as government asked the concession company to get approval from the
central government. Any way project got started in April’99, but again held up for 20 days in
June. Getting environment clearance is tough, as approving sensitivity areas has a direcrt
impact on social life of the citizens, and again according to virtuous circle social impact has an
impact on economy.
4. DATA ANALYSIS

4.1 Opinion Survey

As stated earlier Model Concession Agreement has an impact on effective, efficient and
timely implementation of a project. This is because it takes into account mitigation of wide
array of factors leading to delays, cost overruns and ultimately termination of the project.
Model Concession Agreement helps in encouraging and motivating, private sector and
investors to join hands with the government for effective implementation of infrastructure
facilities. This positive attitude and transparent approach of government has been reflects in the
inference drawn from the analysis of the study.
4.1.1 Analysis
There has been significant impact of different finical, government and contractual
factors on the smooth execution of the project. A study deals in starting the importance of
perfect implementation of Model Concession Agreement in subsiding the risks associated with
those factors and making the privatization process in the state and country as a whole, a
success. In the analysis part, such factor has been taken into consideration and analyzed taking
into account the risks associated with it. Effort has been made to cover most of the factors
impeding to the privatization process and analyzing the implication of Model Concession
Agreement on the same. Table 4.1 covers detailed relative analyzed followed by inferences
from the same.
Table 7 Risk Factors vis-à-vis Legal Framework
Sr. Impeding Factors Associated Risks Importance of Legal Framework

No.
1 Achieving FIRR on Time and Cost overrun Reduced beauracratic hassles

Reduced conflicts of interest
time
2 Corruption Incompetent developer Competitive and fair bidding
Compromise on FIRR process
3 Delays in land Cost overrun Building Transparency

Social Impact Social impact of Model
acquisition
Concession Agreement
4 Government Lack of Information Sharing Information
Technical incompetence Technical incompetence
imprudence
5 Ill chosen methods of Unwanted Delays Governments Commitment
Raising Delays
subsidies
6 Inordinate delays Cost overrun Governments Commitment
Raising different risks Risk Identification and
mitigation

7 Interdepartmental Claims and Counter Claims Building Transparency

conflicts
8 Lack of stability & Demotivated Investors Building Transparency
Unsecured investors Better
clarity of policy
Better & Secure financing
9 Lack of regulatory Distorted & unreliable Implementing regulatory
Feedback of the project framework
framework
10 Lack of Institutional Political interference motivated Transparent and goal oriented
by hidden interest decision making process
framework
11 Lack of corporate Lack of professionalism Implanting corporate governance
Lack of strong and growing
governance
capital market
12 Lack of technical Delay project Technical competence
Increase in cost Competitive bidding
competence
13 Market distortion High cost to end user Implementing strategies
Economically unviable
14 MoA route for Incompetent developer Competitive bidding

Rise in the governments Bidding transparency
selection of t6he
15 developer
Non economic goals Social & political risk
Interministral conflict
16 Non availability of Rise in governments’ equity Economical impact

stakes
domestics financial
Delay in financial closures
17 markets security
Payment Demotivated investors Governments commitment
Rise in the Equity share Better & Secured financing
18 Poor interministerial Lack of information Sharing information

Claims & counter claims Building transparency
coordination
19 Quality of project Effect on EIRR Competitive bidding
Economical impact
20 Socio political Delayed projects Governments commitment

Cost overruns Building transparency
considering

21 Underdeveloped Delays project Economical impact

Cost overruns Better & secured financing
capital markets
4.1.2 Inferences.
From analysis of the risks associated with different factors taken into account following
interference can be drawn, stating the importance of Model Concession Agreement.
 Absence of proper Model Concession Agreement leads to non transparent decision,
backdoor entries & other shady deals. Under these circumstances a private investors
feels very insecure & he always has a doubt on whether his interests will be
safeguarded or not
 Lack of coordination between different governments departments & governments
agencies ensure that the project has to face a number of hurdles which lead to a
significant delay in implementation jeopardizing the financial viability of the project.
This aspect becomes more significant due to the fact that private investors have to pay a
cost for his capital and his capital and he is aware of that unlike the governments
departments.
 As said earlier, a proper Model Concession n Agreement ensures that all Players / bides
get equal opportunities to prove their worth and compete with each other on their merits
not on their size or networks.
4.2 Environment & Social impact of Vadodara – Halol road project
4.2.1 Analysis
Environmental & Social impacts of infrastructure projects are a very crucial issue in
today’s context. Increasing awareness among people, ill founded concepts & aggressive
postures of social organization have made the issue a burning one. A balance is required to be
struck between development and its environment & social impact. This is possible only when
people are well informed government departments are well cleared in their goals & are to have
a holistic view of the society as a whole.
In India we have number of examples of infrastructure projects being delayed because
of improper handling of these sensitivity issues, sardar sarovar dam is one of the classic
example. Vadodara- Halol road project is also one of the examples in the state of Gujarat. In
this case, issue pertaining to the environment, delayed the project & affected the returns from
the project.
 Traffic Risk & Accident Risk
As stated earlier that the project is delayed by one and half year due to environmental
risk, due to which the project also faces from some related risks. Traffic risk is one of them. As
forecasted, the traffic of that road in the future years goes on increasing, creating a congestion
problem on the road. This raises the noise level and this leads to social impact.

Also due to increasing the traffic on the road, it is followed by accident risks as
required facilities are not provided on the road compared to traffic. Both of the above risks
again has an impact on the overall scheduling of the project leading to further delay of the
project.
4.2.2 Inferences.
In order to maintain the EIRR (Economic Internal Rate of Return) & FIRR (Financial
Internal Rate of Return) of a project, all efforts should be aimed at removing the bottlenecks
which lead to time & cost overruns. A proper Legal Framework & better coordination among
governments department will be reasons enough for a private player to consider investments in
this core sector of the economy.
If Model Concession Agreement had been in existence at time of the agreement, at least
the risk would have been envisaged, as an impact of competitive bidding.
Also mitigation of the risk would have been possible after allocating the risk.
Talking about financial viability, a proper institutional & Model Concession Agreement
will ensure that projects are not delays because of social & environmental issues and thus
financial viability of the project is maintained.

Table 8 Expenditure Schedule (present status)
Item of Description Apr – Jun- Aug- Oct- Dec’99 Feb- Apr- Jun- Aug- Oct- Total
May’9 jul’99 Sep’99 Nov’9 - Mar’0 May’0 Jul’00 Sep’00 Nov’0
9 9 Jan’00 0 0 0
Site clearance 0.00 0.00 1.4 0.000 0.00 0.00 0.00 0.00 0.00 0.00 1.4
Earth Work 0.00 0.00 25.69 25.69 25.69 8.56 0.00 0.00 0.00 0.00 85.63
Widening & Strengthening of 0.00 0.00 0.00 36.98 73.97 36.98 92.46 0.00 92.46 36.98 369.83
Exiting pavement
No Pavement Construction 0.00 0.00 0.00 1.19 2.11 1.98 3.43 0.00 3.83 0.66 13.2
Pavement work for lane 0.00 0.00 0.00 0.00 17.17 8.59 14.31 0.00 14.31 2.86 57.24
changing portions
Landscaping 0.00 4.65 0.00 0.00 4.65 4.65 4.65 4.65 0.00 0.00 23.25
Construction of cross 0.00 0.00 6.52 9.78 26.09 9.78 13.04 0.00 0.00 0.00 65.21
drainage works
Minor Bridges 0.00 0.00 0.44 0.88 1.79 0.88 0.44 0.00 0.00 0.00 4.43
Major Bridges 0.00 0.00 8.31 12.47 20.79 12.47 15.80 0.00 6.65 6.65 83.14
Junction improvement & road 0.00 0.00 0.00 0.00 0.00 17.52 40.89 0.00 35.03 23.37 116.81
furniture
Shifting of utilities & other 26.93 0.00 40.39 0.00 0.00 0.00 0.00 0.00 0.00 0.00 40.39
items
Toll plazas & miscellaneous 0.00 0.00 0.00 0.00 7.2 0.00 14.4 0.00 14.4 12.00 48.00
items
Total Expenditure 26.93 4.65 82.75 86.99 179.41 101.42 199.42 4.65 171.35 82.52 935.43
Percentage Total Expenditure 2.88 0.5 8.85 9.3 19.18 10.84 21.32 0.5 17.82 8.82 100


Table 9 Operation & Maintained cost (previous data)
Year Routine Insurances Maintenance Toll Total

Maintenance Expenses & Toll Booth Collection
Expenses Expansion Expenses
2000 14.5 13.4 7.6 35.5
2001 15.7 13 8.2 36.8
2002 16.9 12.6 8.8 38.3
2003 18.3 12.1 9.5 39.9
2004 0.0 11.7 154.2 103 176.2
2005 21.3 11.3 11.1 43.7
2006 23 10.9 12 45.9
2007 24.8 10.4 12.9 48.1
2008 26.8 10 14 50.8
2009 0.0 9.6 279.5 15.1 304.2
2010 31.3 9.2 16.3 56.8
2011 33.8 8.7 17.6 60.1
2012 36.5 8.3 19 63.8
2013 39.4 7.9 32.9 80.2
2014 0.0 7.5 651.2 35.5 694.2
2015 46 7 38.3 91.3
2016 49.6 6.6 41.4 97.6
2017 53.6 6.2 44.7 104.5
2018 57.9 5.8 48.3 112.0
2019 0.0 5.3 603.5 52.2 661.0
2020 67.5 4.9 56.3 128.7
2021 72.9 4.5 60.8 138.2
2022 78.8 4.1 65.7 148.6
2023 85.1 3.6 103.8 192.5
2024 0.0 3.2 886.7 112.1 1002.0
2025 99.2 2.8 112.1 1002.1
2026 107.2 2.4 130.8 240.4
2027 115.7 2.0 141.2 258.9
2028 125.0 1.5 152.5 279.0
2029 135.0 1.1 164.7 300.8
Table 10 Operation & Maintained cost (present data)
Year Routine Insurances Maintenance Toll Total

Maintenance Expenses & Toll Booth Collection
Expenses Expansion Expenses

2002 16.9 15.65 8.8 41.4

2003 18.3 15.15 9.5 42.9
2004 19.7 14.67 10.3 44.7
2005 21.3 14.2 11.1 46.6
2006 0.0 13.75 179.9 12.0 205.6
2007 24.9 13.31 12.9 51.1
2008 26.8 12.88 14.0 53.7
2009 29.0 12.47 15.1 56.5
2010 31.3 12.07 16.3 59.7
2011 0.0 11.68 326.1 17.6 355.4
2012 36.5 11.31 19.0 66.8
2013 39.4 10.95 32.9 83.2
2014 42.6 10.6 35.5 88.7
2015 46.0 10.26 38.3 94.6
2016 0.0 9.93 759.7 41.4 811.1
2017 53.6 9.61 44.7 108.0
2018 57.9 9.3 48.3 115.5
2019 62.6 9.01 52.2 123.7
2020 67.6 8.72 56.3 132.6
2021 0.0 8.44 704.1 60.8 773.4
2022 78.8 8.17 65.7 152.7
2023 85.1 7.91 103.8 196.9
2024 91.9 7.65 112.1 211.7
2025 99.3 7.41 121.1 227.8
2026 0.0 7.17 1034.5 130.8 1172.4
2027 115.7 6.94 141.2 264.0
2028 125.0 6.72 152.5 284.3
2029 135.0 6.51 164.7 306.3

Table 11 Financial Analysis (previous status)
Year Project Revenu Maintenanc Insurances Periodic Toll Status

Cost e e Expenses Expenses Maintenanc Collection
e Expenses
1997 0.00
1998 0.00
1999 1303.51 -
1303.51
2000 0.00 118.62 14.5 13.4 0.0 7.56 83.15
2001 0.0 140.21 15.7 13 0.0 8.16 103.41
2002 0.0 165.62 16.9 12.6 0.0 8.82 127.33
2003 0.0 193.98 18.3 12.1 0.0 9.52 154.07
2004 0.0 228.8 0.0 11.7 154.2 10.28 52.6

2005 0.0 268.89 21.3 11.3 0.0 11.11 225.2
2006 0.0 315.59 23 10.9 0.0 12 269.74
2007 0.0 365.31 24.8 10.4 0.0 12.95 317.09
2008 0.0 426.83 26.8 10 0.0 14 376.01
2009 0.0 497.12 0.0 9.6 279.5 15.11 192.92
2010 0.0 577.05 31.3 9.2 0.0 26.11 510.49
2011 0.0 670.33 33.8 8.7 0.0 28.2 599.61
2012 0.0 772.32 36.5 8.3 0.0 30.45 697.07
2013 0.0 891.47 39.4 7.9 0.0 32.89 811.29
2014 0.00 1024.7 0.0 7.5 651.2 35.52 330.57
6
2015 0.0 1181.7 46 7 0.0 38.36 1090.42
7
2016 0.0 1370.1 49.6 6.6 0.0 41.43 1272.45
3
2017 0.0 1570 53.6 6.2 0.0 44.75 1465.46
2018 0.0 1808.3 57.9 5.8 0.0 48.32 1696.35
3
2019 0.0 2077.6 0.0 5.3 603.5 52.19 1416.99
9
2020 0.0 2388.7 67.5 4.9 0.0 82.14 2234.2
8
2021 0.0 2747.9 72.9 4.5 0.0 88.71 2581.78
2022 0.0 3126.9 78.8 4.1 0.0 95.81 2947.36
2023 0.0 3560.9 85.1 3.6 0.0 103.47 3368.74
1
2024 0.0 4057.4 0.0 3.2 886.7 111.75 3055.79
6

2025 0.0 4612.2 99.2 2.8 0.0 120.69 4389.56

5
2026 0.0 5252.8 107.2 2.4 0.0 130.35 5013.00
7
2027 0.0 5699.9 115.7 2.0 0.0 140.78 5441.49
4
2028 0.0 6155.5 125.0 1.5 0.0 152.04 5877.00
4
2029 0.0 6640.6 135.0 1.1 0.0 164.20 6340.36
4
Years NPV @21% IRR

10.0 -391.00 6.03
15.0 -245.00 14.92
20.0 -118.00 18.87
25 -18.00 20.74
Table 12 Financial Analysis (present status)
Year Project Revenu Maintenanc Insurances Periodic Toll Status

Cost e e Expenses Expenses Maintenanc Collection
e Expenses
1997
1998
1999 292.6 0.0 0.0 0.0 0.0 0.0 -292.6
2000 0.00 0.0 0.0 0.0 0.0 0.0 0.0
2001 1248.04 0.0 0.0 0.0 0.0 0.0 -
1248.04
2002 0.0 165.52 16.9 15.65 0.0 8.8 124.15
2003 0.0 193.98 18.3 15.15 0.0 9.5 151.06
2004 0.0 228.8 19.7 14.67 0.0 10.3 184.14
2005 0.0 268.89 21.3 14.2 0.0 11.1 1223.3
2006 0.0 315.59 0.0 13.75 179.9 12.0 109.97
2007 0.0 365.31 24.9 13.31 0.0 12.9 314.22
2008 0.0 426.83 26.8 12.88 0.0 14.0 373.15
2009 0.0 497.12 29.0 12.47 0.0 15.1 440.59
2010 0.0 577.07 31.3 12.07 0.0 16.3 517.41
2011 0.0 670.33 0.0 11.68 326.1 17.6 314.97
2012 0.0 772.32 36.5 11.31 0.0 19.0 705.50
2013 0.0 891.47 39.4 10.95 0.0 32.9 808.22
2014 0.00 1024.7 42.6 10.6 0.0 35.5 936.08
6

2015 0.0 1181.7 46.0 10.26 0.0 38.3 1087.18

7
2016 0.0 1370.1 0.0 9.93 759.7 41.4 559.06
3
2017 0.0 1570.4 53.6 9.61 0.0 44.7 1462.44
2
2018 0.0 1808.3 57.9 9.3 0.0 48.3 1692.79
3
2019 0.0 2077.6 62.6 9.01 0.0 52.2 1953.95
9
2020 0.0 2388.7 67.6 8.72 0.0 56.3 2256.15
8
2021 0.0 2747.9 0.0 8.44 704.1 60.8 1974.54
2022 0.0 3126.0 78.8 8.17 0.0 65.7 2973.3
0
2023 0.0 3560.9 85.1 7.91 0.0 103.8 3364.06
1
2024 0.0 4057.4 91.9 7.65 0.0 112.1 3845.74
6
2025 0.0 4612.2 99.3 7.41 0.0 121.1 4384.45
5
2026 0.0 5252.8 0.0 7.17 1034.5 130.8 4080.44
7
2027 0.0 5699.9 115.7 6.94 0.0 141.2 5435.94
4
2028 0.0 6155.5 125.0 6.72 0.0 152.5 5871.20
4
2029 0.0 6640.6 135.0 6.51 0.0 164.7 6334.3
4
Years NPV @21% IRR

10.0 -577.02 -1.00
15.0 -348.7 13
20.0 -167.23 18.00
25 -13.57 20.80
4.3 Recommendation
Model Concession Agreement, a bunch of positive implication, encouraging
privatization sector participation in infrastructure projects. But what if – only on paper, and not
accessible or explored to most of the entrepreneur, hence following recommendation are made
not for legal frame work but implementing legal framework in best possible way.
 A sector specific guideline, as a backbone to Model Concession Agreement. The guide
lines must consist of minimum:

o Technical Requirement
o Feasibility Requirement
o Past Records
o Sectoral Contribution
o Task Force
 A special task force should be launched to make private sector understand the intension
of government after legal framework. Also should encourage them by conducting
meeting & knowing their opinion & implementing the same if found suitable.
 A continues Upgradation to increase government contribution to the society, which is
there in Model concession Agreement but should be focused.
 Apart from Model Concession Agreement, institutional framework, regularatory
framework and corporate governance should be launched and implemented to take up
the most of the project on that basis.
5. RECOMMENDATION AND CONCLUSION
From the analysis it is clear that the current traffic is much less than the projected one due to
reasons such as:
1. No alternate route study: One major criterion, which is not taken into consideration
during the feasibility study, is alternate route study. It is an important feature of the project
in order to understand the pattern of traffic diversion on the other routes competing with
the Project Road.
2. Another problem to the Project Road is the construction of road ahead. This can cause
delay & more fuel consumption to the vehicle operators & they cannot get any benefits

out of it. This can cause leakage of traffic to alternate route despite the poor service of
the alternate route.
3. Industrial development: The Project was developed keeping in mind the industrial
development of Halol&Panchmahals district. These districts are industrial districts. The
Government offered good amount of tax discount for the development in this district.
Last year. Government removed the facility & the industry had to pay tax, thus hindering
industrial development & affecting the traffic on Project Road.
In the case of Vadodara-Halol toll road, people get diverted to the service road, as it is free of toll or
prefer some other route although it is not in a good condition. In this case service road should be
mandatory for local traffic. They must have different tolling system like:
1. Permanent pass approved by the regional Government for local public to pass on the service
road or different colour pass for the local public.
2. Checking on the tollbooth for entry & exit of traffic other than local traffic. If the vehicle
operator passes through the service road & is not a localite, then he must be charged heavily or
charged the remaining amount of toll.
3. Joint pass system should be there for combined toll rate for service road & for main
carriageway.
4. Or service road should be charged so that the project can perform well. But this is not feasible
as majority of the local public passes through the service road.
5. Development of road / Bridge shall be carried out in segment as per the requirement / future
growth of the traffic in the nearby area. Gradual increase in the width of the road / bridge
shall be carried out.
5.1 Intuitional Framework

Institutional Framework dictates responsibilities & relation between different
framework, policy matters and government ideology towards privatization process. It defines
the requirement and role to be performed by thr governments, establishment strong framework.
Chart 6.1 shows how different framework constitutes to maintain effective institutional
framework.
Fig. 2 The Recommended Institutional framework
Sources of Cost of Finances

Finance Domestics &
Institutional, Foreign Interests
Retail, Capital, rates, Taxes
Bond, Forex Project/country
M.Tech. (Construction
market & Project Management), Manish Patel (CP1209) Page 27
risk premium
Regulatory
Framework
Regulation that
determine the
Institutional
Framework and
Financial market
Types of structure
Instruments Participants
Debt, Equity, Private sector,
Securities or with Public sector,
some guarantees. joins Venture
Bond, Forex
markets
Specific Project
Framework
Sector specific Legal
laws, Rules & Framework
Regulations A framework for
relevant for efficient,
setting up and effective and
financing timely
infrastructure completion of
projects. project structure
Institutional Framework
5.2 Regulatory Framework
Legal Framework all alone cannot work effectively throughout the project right initial
from identification to the transfer. There should be something that can regulate the process,
thus there arises a need to form a Model Concession Agreement guided by Legal Framework.
The trend of increasing private participation in infrastructure issues to the
Fore. Chief among them is the role of regulatory agencies.

In the past, ministers and tap bureaucrats have generally resisted independent
regulatory agencies. But now it's a time to provide effective Model Concession Agreement as
they are beginning to see the benefits provided by these regulatory agencies.
5.3 Effective Regulatory Framework

 A regulatory agency must have independence, autonomy and expertise to be truly
effective.
 It must also be accountable.
 It must be independent from political pressures-from ministries and from regulated
enterprises, private or public.
 Appointing regulators on the basis of professional rather than political criteria.
Technical expertise can be a very good source of resistance to improper influence.
 The regulator must have a distinct legal mandate, free from ministerial control.
 The professional criteria for appointment must .be formally prescribed. They should be
appointed for the fixed terms and protect them from arbitrary removal.
 Regulatory agencies must be autonomous and 'must have their own funding sources. If
they have to rely on budgetary allocations controlled by politicians, their independence
may be compromised.
 They must have autonomy in staffing, so they can recruit people with high levels of
expertise.
 There should be complete transparency in the agency's decision making process,
something that is counter-initiative for many bureaucrats.
 Cheques and balances are required to ensure that the regulator does not stray from its
mandate, engage in corrupt practices, or become grossly inefficient.
 Conflicts of interests must be totally prohibited.
 The regulators selected must have the personal qualities needed to exercise independent
judgment and resist improper pressures or inducements.
 Utility regulation requires personnel with a mix of skill in such fields as economics,
finance, law and engineering. It is sometime suggested that some or all of the
appointees should have industry-specific technical expertise or long experience in the
regulated industry.
5.4 Role of Regulatory Framework.

 Rationalization of tariffs based on socio-economic factors.
 Tariffs adjustment formula and mechanism.
 Setting requirements for entry.
 Prescribing safety and operational standards.
 Contract arbitration.
 The power to impose sanctions for non-compliance.
 Must address safety, anti-trust and environmental concerns.

5.5 Conclusion
As seen in the study, importance of policies on investment and on the whole on the
infrastructure is rampant. Providing facilities is not enough but providing it on time is or more
importance. Financial, economical and social appraisal of the project solely depends on the
policies and vice versa. Policies should be formed with the spirit of "shared gain shared pain",
as this would lead to transparent of government's intentions.
If India is to develop, its infrastructure needs to be develop first. This development asks for
huge investments, which cannot be entirely borne by the government, and hence private
participation in infrastructure projects becomes issue of vital importance for the development
of this country.
Hence, in order to bring in private money into this sector and make India competent with
the global scenario, the sector needs to be made attractive by taking sector specific policy
decisions, establishing an institutional framework to govern, developing a strong Legal
Framework to safeguard the interest of entrepreneurs and by removing beaurocratic hurdles.
5.6 Limitation of the Study.

On account of limitations of time and very little Indian experience on privatization of
infrastructure projects, it was no possible to go through many case studies and real life
examples, which could have brought a significant practical relevance to the study.
5.7 Future Scope of Study
Making this study as a base, further research and study is possible in the following
areas:
 A study on economic aspects of commercialization of infrastructure projects.
 A study on Environmental Issues in Infrastructure facility provision.
 A study on alternative of financing and a sourcing of new revenue for infrastructure
projects.
 Role of government’s guarantees in financing Infrastructural Projects.
 A study on developing institutional & regulatory framework for development &
management of infrastructure in India.

References
Books
1. Prasanna Chandra (2007),”Projects”, Tata McGraw-Hill Publishing Company Ltd.,New
Delhi.
2. Prasana Chandra (2009), “Financial Management”, Tata MacGraw Hill Publishing
Company Ltd., New Delhi.
3. Yogendra Sharma (2008), “Public Private Partnership in Infrastructure”, Vitasta
Publishing Pvt. Ltd., New Delhi.
Articles
1. Das, R. (2008), “Organized Policies”, Times Journal of Construction and Design of
India, pp 32-56.
2. Das S. (2009), “PPP works for India”, Infrastructure today Journal of India, pp 41-44.
3. David, L. and Reinaldo, C. and Carlson, G. and Carlson, K. (2006) “A Framework for
Assessing Public – Private Partnerships”, Edward Elgar Publishers.
4. “Enabling framework for PPP”, Indian Infrastructure Journal, November 2008, pp 34-
38.
5. Iyer, R. (September 2007), “Private Sector Role Expands”, Indian Infrastructure, pp
66-70.

6. Mahalingam, A (2009) “PPP Experience in Indian Cities: Barriers, Enables, and the
Way Forward” Journal of Construction Engineering and Management, Vol. 136, No. 4.
7. Patankar, V. (2009) “Model Concession Agreement” Journal of Indian Road Congress,
April-June 2009.
8. Ramakrishnan, R. (February 2009), “Partnership Mode” Infrastructure Today Journal
of India, pg 53
Web Sites:
www.privatization.org
www.privatization.com
www.kpmg.org
www.gibd.com
www.economictimes.com
www.indiapppdatabase.com
www.worldbank.org
www.nhai.org

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Model Concession Agreement for Highway Sector

1.2 Need for Study

Infrastructure in India is witnessing a significant interest from both domestic as well as

However, the inflow of investment will depends on a comprehensive policy and

For sustaining private investment in up gradation and maintained of the Highway on

1.) To study the MCA for PPP project in highway sector.

1.4 Scope of Study

Fig. 1 Role, Skill Requirement, and Risks of Private sector

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 2

(Source: Risk Mitigation Strategies in PPP- Projects)

2.2 Projects undertaken through PPP

2.2.1 BOT (Toll) Projects

2.2.2 BOT (Annuity) Projects

2.2.3 Special Purpose Vehicles (SPV)

(Source: ministry of rod transportation and highway)

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 3

2.3 Issues in Model Concession Agreement:

2.3.1 Legal Issue

2.3.3 Technical Issues

(Source: Journal of the Indian Road Congress, April – June 2009)

2.4 Application of the Model

(Source: Edward Elgar Publishers, 2006)

2.5 Improving in Concessionaire Selection

Selection of the most suitable concessionaire is critical to the success of a PPP

(Source: Journal of Construction Engineering and Management, September – October 2004)

(Source:Risk Mitigation Stratigies in PPP)

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 5

(Source:Risk Mitigation Stratigies in PPP)

2.6 Research Gap

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 6

 Road network in India

3.2 Opinion Survey

To find out different factors, impeding the smooth implementation process in

Meeting private sector entrepreneurs and sharing experienced based information

3.2.3 List of factors affecting the process of privatization

Table 1 List of Factors impending to the process of Privatization

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 7

3.3 Detailed Case Study. (Vadodara – Halol Road Project)

3.3.1 Project Characteristics

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 8

3.3.2 Project Road Description.

 Three major bridges:

 Three minor bridges:

3.3.3 Project Cost.

Table 2 Summary of Construction Costs.

Sr. No. Description Cost (Rs.Million)

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 9

11 Cost of Shifting of Services and Other Items. 13.10

Table 3 Details of Landed Project Cost

Sr Description Cost (Rs.

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 10

Model Concession Agreement for Highway Sector

Model Concession Agreement for highway Sector

Table 3.2 Expenditure Schedule (previous data)

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 11

3.3.4 Traffic Study

Table 5 Traffic forecast

Years Bus Truck LCV Car Two Auto

M.Tech. (Construction & Project Management), Manish Patel (CP1209) Page 12

2025 2755 24863 6521 16901 16267 40025