OPPORTUNITIES IN INDIAN ROADS AND HIGHWAYS

USD 8.21 billion outlay planned for highways during 2016-17. In addition, NHAI has been authorized to generate Internal & Extra Budgetary Resource (IEBR) of USD 8.85 Billion during 2016-17. NHAI shall raise its resources under IEBR through 54 C Bonds, Tax Free Bonds and others as approved by the Ministry of Finance.
USD 22.6 billion budgetary support for central road sector development during 2012-17.
5.23 million kms of roads and highways in the country.
1.01 million kms of National Highways.
Ministry of Road Transport & Highways (MoRTH) aims to expand the National Highway network to 0.2 million kms over the next 4-5 years. MoRTH has so far approved in-principle about 38,750 kms of State roads as new NHs subject to outcome of their detailed project reports (DPRs). Further, about 14,000 kms of additional State road stretches are proposed to be upgraded under the "Bharatmala Pariyojana".
The type of PPP project implementation models used in the highways sector are Build Operate Transfer (BOT) Toll, BOT (Annuity) and the Hybrid Annuity Model (HAM).
The implementation agencies of MoRTH include the following: 

National Highways Authority of India (NHAI)
State/UTs PWD (Public Works Department)
National Highway and Infrastructure Development Corporation Limited (NHIDCL)
Border Roads Organisation (BRO)

REASONS TO INVEST

The transport sector contributes 6% of the country's GDP with road transport having around 70% share. More than 60% of freight and 90% of the passenger traffic in the country is handled by roads.
Highway traffic in the country is on a growth trajectory Overall annual freight traffic in the country is estimated to reach around 13,000 billion tonne km (btkm) by 2030 from about 2,000 btkm in 2011-12. Overall annual passenger traffic is estimated to reach around 168,000 billion passenger km (bpkm) by 2030 from about 10,000 bpkm in 2011-12. For both of the above, road transport is likely to cater to around 50% of traffic.
The Government of India has launched major initiatives to upgrade and strengthen highways and expressways in the country including enabling policy measures. MoRTH awarded the highest ever kilometres of new highways in 2015.
In addition to highway development, focus is also on efficient operations & network management for improving logistics efficiency. This shall give rise to new investment opportunities.
MoRTH is implementing enabling measures like setting up of model driving training institutes for drivers of Heavy Vehicles. These schools will further help in streamlining the process of obtaining licenses. In addition, MoRTH envisages training of 20,000 construction workers such as pavement technicians, masons, carpenters, reinforcement technicians each year.
Fiscal incentives for the sector 

100% FDI through automatic route allowed subject to applicable laws and regulation.
Right of way (ROW) for project land made available to concessionaires free from all encumbrances.
NHAI/GOI to provide capital grant (Viability Gap Funding/Cash Support) up to 40% of project cost to enhance viability on a case to case basis.
100% tax exemption for 5 years and 30% relief for next 5 years, which may be availed of in 20 years.
Duty free import of modern high capacity construction equipment.

 STATISTICS

The length of National Highways has grown from 91,287 kms on 31.03.2014 to 1,01,010 kms till date.
113 completed Public Private Partnership (PPP) Projects and 136 PPP projects are ongoing as of 31.03.2016.
Accelerated project award -10,098 kms awarded in 2015-16 as against 7,980 kms in the previous year- annual hike of 26.5%.
Accelerated project construction- 6,029 kms constructed in 2015-16 as against 4,340 kms in the previous year- annual hike of 39%.
85% Indians are solely dependent on public transport. 70 million passengers use State Road Transport Undertaking buses on a daily basis.

 GROWTH DRIVERS

During 2016-17, around 10,000 kms of National Highways are targeted to be completed.
During 2016-17, around 25,000 kms of National Highways are targeted to be awarded. Out of this, NHAI aims to award 15,000 kms and MoRTH another 10,000 kms.
The Government of India aims to develop a total of 63,591 kms of National Highways under various programmes such as: 

National Highways Development Project (NHDP)
​Special Accelerated Road Development Program for the North-East region (SARDP-NE)
Development of roads in Left Wing Extremism (LWE) affected areas
National Highways lnterconnectivity Improvement Project (NHIIP)

National Highways Development Project (NHDP)

The Government launched NHDP to upgrade and strengthen National Highways through various phases of the project. The phase-wide details of NHDP are as follows:

(# included 48,153 km of total NHs, 24km length of Chennai-Ennore port connectivity road, 700 kms NH length under NHDP-VII, other than overlapping length of NHs (5700 kms NH length is common under NHDP-I and NHDP-V, 1000 km proposed Expressway under NHDP-VI).

Special Accelerated Road Development Programme for North-Eastern region (SARDP-NE)
The scheme has been envisaged to be taken up under three parts as under: 

Phase 'A' of SARDP-NE approved by the Government envisages improvement of about 4,099 km length of roads (2,933 km of NH and 1,166 km of State roads). Till March 2016, about 3,115 km of length has been sanctioned at a cost of USD 3.71 billion and 1,639 km of road has been completed. The SARDP-NE Phase 'A' is expected to be completed by March, 2017.
Phase '8' of SARDP-NE, covers 3,723 km (1,285 km NHs and 2,438 km of State roads) of road. Phase 'B' SARDP-NE shall be taken up after completion of Phase 'A', which is targeted for completion by March 2017. The estimated cost of the programme is USD 5.52 billion.
Arunachal Pradesh Package: The Arunachal Pradesh Package for Road & Highways involving development of about 2,319 km length of road (2,205 km of NHs & 114 km of State I General Staff I Strategic Roads) has also been approved by the Government. Projects on 776 km are to be taken up on BOT (Annuity) mode and the remaining are to be developed on item rate contract basis. Till March 2016, about 1,737 km of length has been sanctioned at a cost of USD 2.40 billion and 348 km of road has been completed. The entire Arunachal Pradesh package is targeted for completion by March, 2018.

Improvement of road connectivity in Left Wing Extremism (LWE) affected areas 

The Government has approved a scheme for development of about 1,177 km of NHs and 4,276 km of State Roads in Left Wing Extremism (LWE) affected areas as a Special Project with an estimated cost of about USD 1.09 billion. As on 31st May, 2016, the detailed estimates for 5,469 km length have been sanctioned at an estimated cost of USD 1.28 billion , out of which, works on 5,275 km length costing USD 1.173 billion have been awarded. Development in 3,972 km length has been completed up to March, 2016 and cumulative expenditure incurred so far is USD 0.85 billion.
Development of Vijayawada Ranchi route - Out of 1,622 km long LWE affected Vijayawada - Ranchi route, development of 600 km of State Roads in Odisha (549 km Newly declared NH and 45 km SH), not covered in any Central or State Scheme has been approved by the Government at a cost ofUSD 179 million on 4th November, 2010. So far, the detailed estimates for all the 9 packages in an aggregate length of 594 km have been sanctioned at an estimated cost of USD 201million and works were awarded. The development on 302 km has been completed at the cumulative expenditure of USD 88 million till March, 2016.

National Highway Interconnectivity Improvement Programme {NHIIP) under World Bank Loan Assistance 

About 1,120 km length of NHs are proposed to be improved to 2-lane NH standards following corridor development approach under the World Bank Loan Assistance in Phase-1. DPR preparation for all 11 stretches in Phase- I has been completed and all 15 Contracts have been already awarded. It is envisaged Loan Agreement for Phase- I (1, 120 km under first tranches of Loan Assistance of US$ 500 million) was signed with World Bank on 1 July, 2014.
For projects under the program, the cost of Land Acquisition and utility shifting are to be borne by the Government of India. It is expected to spend about USD 192 million under AP 2016-17. Till the end of December, 2015, all the 15 projects awarded, at award cost of USD 680 million. Till March 2016, 331 km of length has been completed.

 FDI POLICY

100% Foreign Direct Investment (FDI) is allowed under the automatic route in the road and highways sector, subject to applicable laws and regulation.
 
SECTOR POLICY

Development and maintenance of road infrastructure is a key Government priority­ the sector has received strong budgetary support over the years.
Standardised processes for PPP and public funded projects and a clear policy framework relating to bidding and tolling have been developed over the years.
Major policy initiatives undertaken by MoRTH during last two years include: 

Mode of delivery - MoRTH is now empowered to decide on mode of delivery of projects-EPC/PPP.
Enhanced Inter-Ministerial coordination - An Infrastructure Group has been created under Chairmanship of Hon'ble Minister (Road, Transport & Highways) to resolve approval/clearance issues related to Environment & Forests, Railways and Defence, and most of the issues have been resolved.
Exit Policy -Private developers can now exit all operational BOT projects two years from start of operations irrespective of the date of award of the project.
Revival of Languishing projects - Now revival of BOT projects which are languishing in the construction stage is possible through one-time fund infusion by NHAI, subject to adequate due diligence of such projects on case to case basis through an institutional mechanism.
Promoting innovative project implementation models- The Hybrid Annuity Model (HAM) has been developed and adopted for implementation of highway projects. The model takes into consideration appropriate risk allocation. Fifteen projects have already been awarded under this model.
Amendments to the Model Concession Agreement (MCA) for BOT projects - Certain changes in the MCA have been approved by an empowered Committee headed by the Cabinet Secretary based on stakeholders feedback. This would facilitate streamlined development and operation of highway projects

FINANCIAL SUPPORT

The Union Budget of 2016-17 mentions that the total investment in the central road sector would be USD 8.21 billion [including USD 30 million for Road Transport]during 2016-17.
NHAI has been authorised to generate Internal & Extra Budgetary Resource (IEBR) of USD 8.85 billion during 2016-17
 
INVESTMENT OPPORTUNITIES

Current investment opportunities in the sector include the following:

Project Highways- Construction & O&M
Expressway projects including the following: 

Vadodara Mumbai Expressway - 650 km
Bangalore - Chennai Expressway (Green field) - 262 km
Delhi-Jaipur Expressway (Greenfield)- 196 km
Delhi-Ludhiana-Amritsar-Katra with connectivity to Chandigarh Expressway- 600 km
Hyderabad- Vijayawada- Amravathi (HVA) Expressway- 300 km
Nagpur- Hyderabad- Bangalore (NBH) Expressway-1,100 km
Kanpur Lucknow (KL) Expressway- 75 km
Ringroad/ Expressway at Amravathi -186 km

Asset recycling ToT (Toll-operate-Transfer) model - proposed
Innovative technologies, material, equipment etc.
Tunnel projects- many are at bid stage
Projects related to efficient operations & network management for improving logistics including development of Transport Nagars and Logistic Hubs, enabling seamless inter-state traffic movement, improved public transportation etc.
Intelligent Transport Systems (ITS)
Other opportunities- Road Safety, Driver Training Institutes etc.
'Bharatmala Project' (yet to be formally launched) is a new highways development programme that has been recently identified as a premier, long-term, initiative.

Bharatmala (5 years) -proposed components

Component: Coastal & Border roads
Details: Development of Roads along border and coastal areas along with improving port connectivity in synergy with Sagarmala
Length (Km): 7404
Estimated Cost: USD 11.20 billion
Component: Expressways in conjunction with Sagarmala
Details: NHDP VI & Sagarmala recommendations largely overlap and have been merged. The expressways will be built on priority of EXIM trade requirements
Length (Km): 3114
Estimated Cost: USD 22.40 billion
Component: National Corridors efficiency enhancement program (NCEEP)
Details: Golden Quadrilateral (GQ), NS-EW shall be declared as National Corridors. Their throughput can be increased by building
1) Bypasses/elevated roads,
2) Logistics parks,
3) 6 laning of Golden Quadrilateral (GQ)
4) 4 laning of NS-EW
5) De-congestion of Delhi, 6) De- congestion of Bangalore
This phase will subsume NHDP V, VII
Length (Km): 3600
Estimated Cost: USD 18.80 billion
Component: Economic Corridors efficiency enhancement program (ECEEP)
Details: 25 economic corridors similar to national corridors (GQ, NS-EW) identified for development under corridor approach. This phase will subsume portions of NHDP III, IV
Length (Km): 15680
Estimated Cost: USD 13.00 billion
Component: Up-gradation of single lane NH & other high traffic NH
Details: 2L12L-PS/4L, This phase will subsume portions of NHDP IV
Length (Km): 9000
Estimated Cost: USD 14.20 billion
Component: BRT (Bus Rapid Transport)
Details: Backward Areas, Religious, Tourist Places, Connectivity Program
Length (Km): 6572
Estimated Cost: USD 10.00 billion
Component: SetuBharatam Pariyojana
Details: 208 ROB (Rail Over Bridge) + 1500 bridges
Length (Km): -
Estimated Cost: USD 7.60 billion

TOTAL:

Length (Km): ~44000

Estimated Cost: USD ~97.20 billion
 
FOREIGN INVESTORS

Apollo(UK) - JLI(UK) - DSC(lndian) - LOR(UK) Consortium (UK)
CIDBI Malaysia (Malaysia)
Consortium of Gomuda (Malaysia) & WCT Engineering Malaysia (Malaysia)
DSC - Apollo consortium (UK)
Emirates Trading Agency LLC - KMC Construction Ltd. (Dubai)
ERA-SIBMOST (Russia)
ESSEL Infra & CR-18 Consortium (China)
Galfar Engineering and Contracting SAOG (Oman)
Gamuda Malaysia - WCT Malaysia (Malaysia)
GMR-Tuni-Ankapalli Express Ltd. (Malaysia)
Hindustan Construction Company Ltd. -Laing-Sadbhav Consortium (UK)
IDFC-PLUS ExpesswayBerhad Consortium (Malaysia)
IJM - SapoorjiPallonji (JV) (Trichy toliwayPvt. Ltd.) (Malaysia)
IJM Corporation Berhad - IDFC Ltd. (Malaysia)
IRB Infrastructure Developers Ltd.- Deutsche Bank AG (Singapore)
IsoluxCorsanConcesionnes Sa - CorsanCorviam Constructions SA - Soma Enterprise Ltd (Spain)
JMTPL(I) Corporation Project (Malaysia)
KMC Construction Ltd.- CR18G Consortium (China)
MVR - MRK - JTEC (JV) [MVR infrastructure &Tollway Pvt Ltd.] (China)
NavinyaBuildcon-Atlantia Spa(JV) (Italy)
Ramkey Infra and JPTEG (China)
RIL-AAA- JTEG Consortium (China)
SREI - PNC - GAL FAR Consortium (Dubai)
SREI-Simplex-Galfar Consortium (Shree Jagannath Expressway pvt.ltd.) (Dubai)
Supreme Infrastructure India Ltd.-Mahavir Road & Infrastructure Pvt. Ltd.-China State Construction Engg. Honqkcnq Ltd. (China)
SVBTG Consortium of Pacific Alliance Inc -PBIDC - STRADEC Inc- CES & L&T (USA - Phillipines)
Tambaram-Tindivanam Express way Pvt. Ltd. (Consortium of GMR Consortium & UE Malaysia) (Malaysia)
Tantia-Jiangsu (JV) (China)
Transstroy (I) Ltd. - Corporation Transstroy OJSC Consortium (Russia)
 
AGENCIES

National Highway Authority of India
Indian Roads Congress
Central Road Research Institute.