1

Financial Viability of Project A Case study on Mumbai Pune Express Highway

Dr.Hiren Maniar
1


Introduction:
An expressway is a controlled-access highway; it is a highway that controls entrances to it and exits
from it by incorporating the design of the slip roads for entry and exit into the design of the highway
itself. Access-control should not be confused with collection of toll. An expressway may be free to use
and may not collect toll at all. Expressways are the highest class of roads in the Indian Road Network.
These are six or eight lane highways with controlled-access. India has approximately 600km
expressways.
National Highway system of India consists of approximately 10,000 km (6,200 mi) of four-laned
highways that collect toll from users but do not have control of access and cannot be called
expressways. Currently, a massive project is underway to expand the highway network and
the Government of India plans to add an additional 18,637 km (11,580 mi) of expressways to the
network by the year 2022. These roads will be access-controlled roads and will feature between four
and six lanes with 3,530 km (2,190 mi) km to come up in the next three years (starting when?).
The Ministry of Road Transport and Highways is already in the process of preparing a draft for
creation of a National Expressways Authority of India (NEAI) on the lines of NHAI

Need of Mumbai Pune Expressway

The need for the Mumbai-Pune expressway was established by a study conducted by the ministry of
surface transport (MOST) during the seventh five-year plan (1985-90) which identified this corridor as
amongst the three most congested national highway corridors and proposed it to be developed, as a
part of the "National Expressway System". Accordingly, it was decided to explore the possibility of
providing a new expressway between Pune and Mumbai.The need for constructing the Mumbai Pune
express highway was borne by the fact that Mumbai was commercial capital of India and pune was
developing into a major industrial and commercial center.
The Mumbai Pune Expressway, officially the Yashwantrao Chavan Expressway is India's first six-lane
concrete, high-speed, access controlled tolled expressway. It spans a distance of 93 km (58 mi)
connecting Mumbai, the administrative capital of Maharashtra and the financial capital of India,
with Pune, an industrial and educational hub. This expressway introduced new levels of speed and

1
Dr.Hiren Maniar is working as Faculty in Finance with L&T Institute of Project Management, Vadodara
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safety in automobile transportation to Indian roads. The expressway has reduced the travel time
between the cities of Mumbai and Pune to approximately two hours. For most practical purposes, it
has replaced the older Mumbai-Pune stretch of the Mumbai-Chennai National Highway (NH 4), which
had become extremely congested and accident-prone over time. The expressway starts at Kalamboli
(near Panvel) and ends at Dehu Rd. (near Pune). It cleaves through the scenic Sahyadri mountain
ranges via passes and tunnels. It has five interchanges Kon (Shedung), Chowk, Khalapur, Kusgaon
and Talegaon.
The expressway has two carriageways with three concrete lanes each separated by a central divider
and a tarmac or concrete shoulder on either side. Vehicles with fewer than four wheels
and agricultural tractors are not permitted, although tractor-trailers (semi-trailer rigs are permitted).
The expressway handles about 30,000 PCUs daily, and is designed to handle up to 1,000,000 PCUs.

More recently this link between Pune and Mumbai has become crucial for the development of the
computer and information sector that is perceived to be a key element in facilitating globalization and
international business linkages. The distance between the two cities is some 180 km and it takes
about four and a half to five hours to cover it under good traffic conditions. However due to flooding
and landslides in the Western Ghats the roads get frequently and unpredictably paralyzed by
accidents, which block the narrow and winding curves of the two-lane highway. These increase the
travelling time to somewhere around 10 to 15 hours. At present 400 persons are killed due to
accidents on the existing Mumbai-Pune National Highway each year
2
.

Background of the Mumbai Pune Expressway:

The MSRDC
3
has carried out the corridor planning and Techno-Economic Feasibility report for the
land development along the Mumbai - Pune Expressway. The following sites are identified for
development of the Road Side Facility in a Profitable and Environmentally sensitive manner for
commercialization. The parties interested in developing the Road Side Facility may contact the
MSRDC. There is lot of scope for development of Road Side Facilities like Rest Places, Hotel, Motel,
Restaurant, Service Station, Truck Repair and Maintenance Facility, Auto Show Room, Convention
Center, Hospital, Naturopathic and Ayurvedic Center, Discount Shopping Center, Multiplex corporate

2
The Financial Express official website http://www.financialexpress.com/fe/daily/20000730/fec30031.html
3
Maharashtra State Road Development Corporation Limited, commonly abbreviated as MSRDC, is an Indian Public limited
company fully owned by the Government of Maharashtra. MSRDC was established on J uly 9, 1996 and incorporated as a public limited
company under the Companies Act 1956 on August 2, 1996. It is responsible for developing, building and maintaining roads
in Maharashtra.

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training and conference facilities, Farmers Market, call centers etc.

The Mumbai Pune Corridor a part of the National Hihgway NH4 is was identified by a study
conducted by the Ministry of Surface Transport (MoST) during the seventh five year plan as amongst
the three most congested national highway corridors in the country. MoST proposed that this corridor
be developed as part of the National Expressway System. This corridor had been unable to develop
because of high traffic volumes, high growth rates and restrictions on widening because of the
topography of the Ghats and the lack of sufficient funds with the Government. Because of this, the
corridor was unable to grow and match the needs of traffic. Handling around 20000 PCUs a day in
1990, it was projected that the traffic volumes would raise to around 100,000 PCUs, necessitating a
ten lane corridor between Mumbai and Pune. The GoM, in 1990, decided to construct a new
expressway between the cities of Mumbai and Pune as a long-term solution to the problem and
accordingly appointed RITES
4
along with Scott Wilson Kirkpatrick (UK) to conduct a techno-economic
viability study for the expressway.
Details of Expressway are as below.


Sr.No. Name of the Site Location from Kalamboli Area under possession
1 Kon Km 9.5 at the left side of Pune
corridor.
Around 4 hector.
2 Bhatan Km 15 at the left side of Pune
corridor.
Around 12 hector.
3 Bhatan Dumping Km 13.800 at the left side of Pune
corridor.
Around 12 hector.
4 Madap Km 25 on top of Madap tunnel. Around 22 hector.
5 Kumbhawali Km 28 on the left side of Mumbai
Corridor. Access is from S.H. 81
Around 12 hector.
6 Sanigaon Km 34.5 on both sides of the
Expressway.
Area 10 hectors on each side
of the Expressway.
7 Kusgaon interchange Km 54.5 (below Kusgaon
Interchange)
Around 5 hector.
8 Kusgaon - Dongargaon Km 58.5 Area around 20 hector
9 Taje Km 67.5 at the left side of Mumbai
Corridor.
Area around 20 hector
10 Urse Km 84 left side of Pune Corridor. Area around 22 hectors.

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RITES, a Government of India Enterprise, provide comprehensive engineering, consultancy and project management services in the
transport infrastructure sector under single roof. Since its inception in 1974, company has made steady progress and diversified into
new areas of business such as, export/leasing, maintenance and rehabilitation of railway rolling stock, operation and maintenance of
railway systems under concession agreements and BOT, BOOT and PPP projects.
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11 Kalamboli
Km 0/500 (below Kalamboli
flyover)
Area around 3.00 hectors.

Salient features of Mumbai Pune Expressway

This is India's six lane access control expressway which is being build with modern technology &
machineries as per international standard. For safety of traffic compound wall / fencing is build on
both side of expressway. For the state highway and other road crossings Underpass / Overpass
has been build. Two wheeler, three wheeler and tractors vehicles are banned on expressway. At
every 300 to 500 meters subways have been provided for the local villagers. This project (BOT)
basis i.e. Build - Operate - Transfer. Government is planning to build different interchanges to
tackle inflow of traffic from Kalyan, Ahmednagar, Chakan & NH-17. Maximum tunnels are of
international standard. Around 7000 trees have been planted on both sides of expressway. Petrol
pumps and Motels are being constructed. For emergency and to remove accident vehicles
highway police have different cranes. Some of the salient features are

India's first six lane access control expressway
Speedy completion of work
Use of modern technology & machineries
Construction of expressway is done as per international standard
For safety of traffic compound wall / fencing is proposed on both side of expressway
Underpass / Overpass has been provided for the state highway and other road crossings
Ban on two wheelers, three wheelers and tractors vehicles
Provision of subways for villagers at every 300 to 500 meters distance
Project is on Build - Operate - Transfer (BOT) basis
Government has given guarantee for raising of funds from financial institutions
To cater to traffic of Kalyan, NH17, Pen, Ahmednagar, Chakan, etc., five interchanges have
been proposed
Cranes are provided to lift and remove accident vehicles
Provision of Petrol pumps / motels / workshops etc
Provision for 7000 trees plantation on both sides of expressway
Five tunnels of international standards



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Benefits of Mumbai Pune Expressway
Reduction in accidents
Savings in travel time
Saving in fuel consumption by vehicles
Fast crossing of Khandala Ghat
Economic development through speedy traffic
Reduction in pollution

Current Status of Project


The expressway is opened to traffic in the portion from Kon to Aadoshi Section 'A' & 'B' on 1st May
2000.Section 'C' (Kusgaon to Ozarde) and Section 'D', in part (Ozarde to Somatnephata) is
opened to traffic from 27th J uly 2000 and (Somatnephata to Kiwale) is opened to traffic from 10th
J une 2000 and traffic is plying smoothly on expressway since then. Panvel Bypass Package I & II
(total length 9.750 kms) has been completed and the Expressway is now opened for full length of
95 km from 1st March 2002. The average number of vehicles plying on the expressway per day is
about 12,000.




Present toll rates for 95 km of the Expressway w.e.f from 01.04.2008 to 31.03.2011

Type of Vehicle Toll Rates (Rates in Rupees)
Car 140.00
Light vehicles & mini buses 216.00
Trucks 300.00
Buses 411.00
3 Axle vehicle 710.00
Multi axle vehicle 946.00



Public Work Department, Government of Maharashtra, Mantralaya has issued Notification vide
No.2000/Pr.kr.-106/Road - 8 dated 9th August 2004 for levying toll on vehicles traveling on
Mumbai Pune Expressway. The rates of toll per trip are in force from 1
st
April 2005 to 31
st
March
2008.



Mumbai is the commercial capital of India and is growing significantly in size and population. So
also Pune, the cultural capital of Maharashtra is growing into a major industrial and commercial
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centre. Hence, the importance of Mumbai - Pune road has increased tremendously in the last 8 -
10 years.
Due to the increase in the traffic every year resulting in jams, accidents, increase in travel time,
has made it necessary to build a new and independent expressway. 400 persons were killed due
to accidents on the existing Mumbai - Pune National Highway each year.





In 1990, the Government of Maharashtra appointed RITES and Scott Wilson Kirkpatrick of UK to
carry out feasibility studies for the new expressway to be operated on toll basis. RITES submitted
their report in 1994 with the estimated cost of project at Rs. 1146 crores.

The Government of Maharashtra entrusted the work of the construction of the Mumbai - Pune
Expressway to MSRDC in March 1997 on Build - Operate & Transfer (BOT) basis with
permission to collect toll for 30 years. The environmental clearance from the Ministry of
Environment and Forest, Government of India was received on 13th October 1997. The Forest
Clearance was received on 11th November 1997.




For the purpose of preparing detailed estimates, designs and preparation of bid documents, the
work was divided into 8 sections. To facilitate proper supervision, six renowned international
consultants were appointed. Initially tenders for four sections e.g. A, B, C & D were invited on 11th
November 1999.



The tender notice was published in leading newspaper all over India and also on internet. Due to
wide publicity 133 tenders were sold and on 18th December 1997, 55 tenders were received.
After technical & financial evaluation tenders were accepted and work orders were given on 1st
J anuary 1998 to four contractors. Thereafter tenders for widening of Khandala Ghat & Lonavala -
Khandala Bypass works were invited. The tenders were received on 24th August 1998 and work
orders were issued on 4th September 1998. For the last section of this expressway i.e. Panval
Bypass work tenders were invited and work orders were issued on 24th March 1999 and 6th April
1999.





Total Project Cost including escalation is Rs. 1630 crores.





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Expressway has four lane wide tunnels at 5 locations with total length of 6000 meters. There are
separate tunnels for traffic in both the directions and the cost of the tunnels is about Rs. 200
crores. The tunnels on this expressway have been provided with modern facilities of ventilation,
lighting and fire fighting vehicles and would rank amongst the best in the world. This work was
entrusted to Konkan Railway Corporation Ltd. on 8th December 1997. All tunnels are completed.





Tunnel Status
Bhatan Completed
Madap Completed
Kamshet - I Completed
Kamshet - II Completed
Khandala Completed
Aadoshi only for Mumbai bound traffic Completed



Expectations from Mumbai Pune Expressway Project:

RITES submitted its report in 1995 and recommended that a new expressway be constructed starting
at Kon near Panvel and ending at Dehu road near Pune to be operated as an access-controlled tolled
road. The road was to be constructed with the latest technology and incorporate features such as
guard rails, dual carriageways, and speed monitoring equipment which would make it much safer
than the existing road. In addition, the width of the road would ensure that congestion did not take
place. Some of the salient features of the RITES report are as shown as per The RITES-SWP Report,
Volume 1.
1. The construction of a dual three-lane expressway taking off from Kon near Panvel and ending
on the Westerly Bypass outside Pune at Dehu Road. The total length of the proposed road is
85 km.
2. The estimated project cost at 1994 prices is Rs 11,464 mn.
3. Diversion of traffic to the new expressway is estimated to be between 40-45%.
4. The EIRR for the project is 17.81% as opposed to the Planning Commissions cut-off rate of
12%. Hence the project is economically viable.
5. Property development on the land in the vicinity of the expressway is a possible

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Feasibility study report status of Mumbai Pune Expressway

In 1990, the Government of Maharashtra appointed RITES and Scott Wilson Kirkpatrick, UK, to carry
out feasibility studies for the new Expressway which is operated on a toll basis. Rites submitted their
report in 1994 with the estimated cost of the project at Rs1146 crores ($240 million).
The Government of Maharashtra entrusted the work of the expressway's construction to the
Maharashtra State Road Development Corporation Limited (MSRDC) in March 1997 on a Build
Operate and Transfer (BOT) basis, with permission to collect tolls for 30 years. The environmental
clearance from the Ministry of Environment and Forest, Government of India was received in October
1997. The clearance was received in November 1997.
For the purpose of preparing detailed estimates, designs and preparation of bid documents, the work
was divided into eight sections. To facilitate proper supervision, six international consultants were
appointed. Initially, tenders for four sections were invited on 11th November 1999.
Due to wide publicity, 133 tenders were sold and on 18
th
Dec 1997, 55 tenders were received. After
technical and financial evaluation, tenders were accepted and work orders were given on 1
st
J anuary
1998 to four contractors. Thereafter, tenders for the widening of Khandala Ghat and the Lonavala to
Khandala Bypass works were invited. The tenders were received on 24
th
August 1998 and work
orders were issued on 4
th
September 1998. For the last section of the Expressway work tenders were
invited and work orders were issued on 24
th
March 1999 and 6
th
April 1999. The total project cost,
including escalation and interest during the construction period, was valued in the region of Rs1,630
crores ($350 million).
The expressway has six lanes divided at the centre by a 7m-wide divider. An extra lane was provided
on each side as a hard shoulder. The road is designed to cut down travel time between Mumbai and
Pune to three-and-a-half hours at a speed of 70km/h to 120km/h.
Important findings of the feasibility study are as given below

RITES recommended the construction of a dual three-lane expressway taking of from the NH4
at Kon near Panvel and ending at Dehu Road on the westerly bypass outside Pune a total
length of 84 km.
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Project cost, as estimated by RITES at 1994 prices, was Rs 11,464 million.
RITES estimated that the diversion of traffic to the new expressway would be the order of 40-
45 percent of the total corridor traffic.
The EIRR for the project was 17.81 percent, which is above the planning commissions cut-off
rate of 12 percent. Hence, the expressway project, as envisaged by RITES, was economically
viable.
RITES recommended that subsidy might come from income through property development on
the land in the vicinity of the expressway.

Role of the MSRDC:

In order to accelerate the process of road development in Maharashtra, the MSRDC was established
by the Government of Maharashtra through a resolution issued on 9th J uly 1996 and incorporated as
a limited company on 2
nd
August 1996 under the Indian Companies Act, 1956. The MSRDC was set
up in Maharashtra to expedite work related to road sector development in the state on a BOT
scheme. After that a committee was set up to look into the geometric standards and technical
provisions to de adopted for the construction of the highway. The committee finally recommended the
construction of a rigid pavement, which would have an incremental sot of 6% over the flexible
pavement but was more economical. MSRDC started a series of meetings with the concerned
authorities and departments so that work could be completed expeditiously and in time.

MSRDC had been constituted with the following objectives:

To enter into a contract in respects of the works and any other matters transferred to the
Corporation along with assets and liabilities.
To plan, investigate, design, construct and manage identified road projects and their area
development.
To promote and operate road projects
To invite tenders, bids, offers and enter into contracts for the purposes of all the activities of
the Corporation.
To promote participation of any person or body or association of individuals, whether
incorporated or not, in planning, investigation, designing, construction and management of
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transport projects and area development.
To undertake schemes or works, either jointly with other corporate bodies or institutions, or
with Government or local authorities, or on agency basis in furtherance of the purposes for
which the Corporation is established and all matters connected therewith.
To undertake any other project and other activities entrusted by the State Government in
furtherance of the objectives for which the Corporation is established.

MSRDC's mandate was to accelerate transport infrastructure development in the state by overseeing
the completion of existing and new projects with the active participation of the private sector through a
time bound program. Because of unavailability of any private sector player and because of its
mandate, the work of the MPE had been awarded to the MSRDC in March 1997.

Scope of Project Management Consultants:

It was decided to employ a panel of PMCs to carry out detailed engineering design and estimate and
supervise the construction work. The PMCs were selected on the basis of marks allotted with weight
age of 80 percent on the technical and 20 percent on the financial offer. A condition was put that a
PMC will not be allowed to undertake work of more than one section. The minimum technical
supervisory staffs were also insisted upon. Based on the detailed designs and estimates prepared by
the PMCs, MSRDC invited bids from contractors for the construction of the expressway.

The Project Management consultants were to have the following functions:
Preparing estimates and detailed designs
Issuing tender papers & bid evaluation
Supervision: ensuring quality and correctness of work

Committees were to be formed to perform each of the aforementioned tasks by drawing personnel
from each of the PMCs to ensure consistency. A list of prospective PMCs was drawn up from the lists
available with MoST
5
and NHAI
6
, and bids were invited from them. Because the most important skill
for a PMC was considered to be Technical Skill, the selection criteria were such that 80% weightage
was assigned to the technical bid and 20% to the financial bid. A condition was imposed that 1 PMC

5
Ministry of Surface Transportation of India
6
National Highways Authority of India
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could work on only 1 section of the Expressway to avoid excess load on a PMC. Presence of a
minimum number of technical supervisory staff at the project site was insisted upon before awarding
the contract.
Bids were ranked by assigning 25 percent weightage to technical scores and 75 percent weightage to
the financial bid. Work orders to the contractors were issued in J anuary 1998. The work of tunnelling
was awarded to Konkan Railway Corporation Ltd, on a turnkey and cost plus basis.

April 1997 Bids for PMCs called for.
May 1997 Receipt of bids from prospective PMCs.
J une 1997 Fixing of 6 PMCs 1 each for Sections A, B, C and D; I for the Panvel Bypass; 1
for the Ghat section.
The following table shows the final section wise details of the PMC's and Contractors involved:

Section Technical
Consultants
Est. Cost
in crores
Tender
Amount in
crores
Contractor
Section 'A'
(Kon to Chowk)
13.232 km.
Stup Consultants
with Hyder
Consulting Ltd. U.K.
127.33 136.82 IJ M / SCL J oint
Venture
Section 'B'
(Chowk to Aadoshi)
16.629 km.
Intercontinental
Consultants &
Technocrats Pvt. Ltd.
India
183.73 194.00 Hindustan
Construction Co.
Mumbai
Section 'C'
(Kusgaon to Ozarde)
22.995 km.
Frishmann Prabhu
(India) Pvt. Ltd.
177.46 163.56 Larsen and Toubro
Ltd. Mumbai
Section 'D'
(Ozarde to Dehu
Road)
16.150 km.
Sir Owen Williams
Innovestment
132.70 133.47 V.M. J og Engineering
Ltd. Pune
Ghat Section Package
- I
Aadoshi to long tunnel
7.13 km.
Consulting Engg.
Service (India) Ltd.
86.46 93.15 Shapoorji Pallonj &
Co. Mumbai.
Ghat Section Package
- II
Long tunnel to
Lonavala bypass 8.28
km.
Consulting Engg.
Service (India) Ltd.
108.96 104.35 Larson & Toubro Ltd.
Chennai
Panvel Bypass
Package - I
Technogem
Consultants Thane
108.00 88.89 PBA - PCEC (J V) M.
Venkat Rao

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0/0 to 8/200, 8.20 km. Visakhapatnam
Panvel Bypass
Package - II
8/200 to 9/750, 1.550
km.
Technogem
Consultants Thane
64.50 49.99 PBA - PCEC (J V) M.
Venkat Rao
Visakhapatnam
Tunnel Work
5 Twin Tunnel 5724
m. Tunnel Length
200.00 200.00 Konkan Railway
Corp. Ltd.
Other Exp.
Tollplaza, Building,
fencing sign boards,
Technical consultants
fees, etc.
324.00
Total... 1200.46 1488.00



Construction materials estimation for completion of Project


The construction material requirement and quantities of some major items are given below :-


Description Unit
Physical land acquired for road 640 hectares
Land acquired for Murum qurries & Dumping
area
455 hectares
Total Excavation
Murum
In cutting
Embankment work
Total length of tunnels
Excavation for approaches to tunnels
Excavation Tunnels
Total cement required
Total steel required
Explosives required for blasting
Total diesel required
Total water required
Total electricity required
Cost of machineries

110.00 lakhs C.M
40.74 lakhs C.M.
78.40 lakhs C.M.
5724 meters
19.74 lakhs C.M.
8.30 lakhs C.M.
7.17 lakhs M.T.
28200 M.T.
2800 M.T.
700 lakhs ltr.
300 crores ltr.
53 lakhs unit.
300 crores.



The cost to meet environmental obligation estimated to be as follows:

Total Capital Cost In Rs. Lacs (INR)

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Aforestation 30
Minimisation of Severance 3874
Development of Grazing Lands 80
Annual Recurring Cost
Monitoring Cost 6
Ecology Survey 3
Source: Environmental Impact Report, RITES, Volume 3

Operation and Maintenance Scope

The Expressway was opened to traffic and made fully operational from April 2002. The activity of
operation and maintenance of this Expressway was entrusted to international agency M/s Elsamex
Shinde IRB J /V for a period of three years upto April 2005.

Subsequently, the work of improvement of Old National Highway NH-4 is entrusted to MSRDC by
Ministry of Road Transport & Highways, Govt. of India. This improvement NH-4 work coupled with
operation and maintenance of Mumbai Pune Expressway was entrusted to BOT operator for a
period of 15 years from Aug. 2004 to Aug. 2019. This was a unique experiment done by MSRDC
with success and has now become trendsetter for all the major projects to be undertaken
elsewhere.


Scope change of Mumbai Pune Expressway Project:

In October 1997, forest and environmental clearances had been received. However, the Ministry of
Environment and Forests did not permit construction of the new alignment in the Ghat area. The
reason was that there was a danger to endangered species of flora (800 species of rare medicinal
herbs found exclusively in the Ghats) and rare species of wildlife such as the mousedeer, the giant
Malabar squirrel and some species of butterfly. The environmental management plan proposed was
deemed not to sufficiently protect them. However the MoEF allowed widening of the existing Ghat
portion of NH4, along with the Lonavala and Khandala bypasses in lieu of the original expressway
alignment. Hence the MoST clearance had to be obtained to widen NH4 and use it. The new
expressway alignment would use the same corridor through the Ghats as the existing NH4, instead of
the original alignment from Adoshi to Kusgaon. This would entail the construction of a bypass around
the town of Lonavla to reduce congestion and increase the average speed on the road. However this
14

also resulted in increase of the total km of the road by around 8km. The final alignment for the road is
as shown:

(Source: MSRDC documents)

The dotted line showed the original alignment through the Ghats while the dark line shows the final
alignment. As a final modification in 1998, GoM decided that the Panvel Bypass be included as part
of the Expressway, and GoI was requested to transfer work on the bypass to MSRDC. Then
necessary clearance for this was obtained. The length of the project now was 95 km.

Project Sops to PMC & Contractors:

To ensure quick and efficient working, and to ensure that the project was completed on time, MSRDC
and GoM
7
provided several facilities to contractors and consultants. These facilities include sops to
the project partners, and also included completion of tasks that the consultants/contractors would
normally have to do themselves. The expenditure on extra services/facilities did not, however,
increase production costs it reduced them by 8-10% as a result of speedy project completion and
reduction in delay-induced cost overruns.

To PMCs:
On-site facilities given to PMCs. Site offices constructed for PMCs by contractors at MSRDCs
expense, and standard equipment like Xerox, printer, telephone provided.


7
GoM Government of Maharashtra
15

To contractors:
Financial sops
Running Account bills to be cleared within 10 days. Beyond that 16% interest to be paid.
Materials to be provided at the project site at 75% of the market value.
Escalation of steel, cement and bitumen prices to be absorbed.
Mobilization advances and machine advances (up to 15% of project cost) granted to ease cash
flow situation in the initial stage.
Reimbursement granted for increase in sales tax or other taxes.
For new construction machinery imports, customs duties to be reimbursed, to a limit of $0.7
million.
Bonus clause (Rs. 2 million / week) for early project completion. Penalty clause (Rs. 3 million /
week) for delayed completion. Also, 4 milestones along the way, stipulated in terms of physical
completion of important items in specified time. For non-achievement of milestones,
compensation, subject to a maximum of 10% of contract value, was stipulated. Compensation
was Rs. 2 million, Rs. 1.5 million, Rs. 3 million, and Rs. 3 million per week for milestones 1, 2,
3, and 4 respectively.
Land:
Land for RoW acquired for almost the entire alignment so that the construction could begin
immediately (1000 ha of land acquired in 8-9 months by liaising with the revenue department).
Land for contractors camps, site plants, crushers, quarries, muck dumping made available
immediately at suitable locations.
All this land was provided at no cost to the contractor.

Other services:
MSRDC facilitated setting up of 8 substations through MSEB at suitable locations (locations
specified in tender document so complete information disclosure and good advance
planning), from where the constructors could buy power supply.
Explosives magazines set up at various locations to facilitate rock-blasting.
MSRDC prompted HP and IOCL to set up petrol/diesel pumps adjacent to alignment.
MSRDC took action to remove/divert utility services like power lines (cost Rs. 300 million, time
taken 4-6 months), telephone lines, water lines, sewer lines etc. coming in the alignment.
Took necessary tree cutting permission.
Survey instruments and laboratory testing equipment procured at MSRDCs cost.
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Construction work started in right earnest with the issue of the order to proceed with the works in
J an/Feb 1998. The contract completion date was specified as 27 months requiring substantial
completion in 24 months when it was proposed to to open the expressway to traffic by J an 2000. The
scale and time schedule of the work was unprecedented in the highway sector but Indian Contractors
rose up to the occasion. Most of the technologies were being tried out in the country for the first time.
The consultants also showed remarkable skills in adapting to new technology and monitoring
techniques.

Project Finance options from MSRDC and the MPE:
In October 1997, preliminary estimate of the project was prepared. It was assessed that the total cost
of the expressway would be about Rs 1630 crore. Almost all tenders were received within the
estimated cost (Rs 1488 crores)
8
. As this is a BOT project, cost of land acquisition and shifting of
certain utilities was borne directly by the government. In order to subsidize the project, the
government has given 1,030 hectares of land, which is to be used to generate surplus income and
make the project financially viable.

The cost of the work is to be recovered from the toll being levied on vehicles using the road. A
request was made to the government to give guarantee for the finances to be obtained from financial
institutions. This was essential since MSRDC is a newly formed company with an equity output of
only Rs 5 crore. It was therefore thought that with government guarantee and project strength,
MSRDC would be in a position to get funds from financial institutions through private placement
financing. Through private placements, Rs 2120.81 crores was obtained which was also meant for
the flyover projects in Mumbai. The MSRDC was raised with an equity contribution of Rs 150 crore
from the GoM and 125 cr from the Bombay Municipal Corporation.

The means of finance for the MSRDC as of J uly 12, 1999 were as follows.
Budgetary Support from BMC and GoM: Rs 275 cr
Loan from MMRDA: Rs 548 cr
Bank Loans: Rs 107 cr
Capital Market borrowings:
Bonds (rated AA) of over Rs 1897.6 crores


8
Maharashtra state road development corporation http://www.msrdc.org/projects/mumbai_pune.html
17

The Government of Maharashtra had guaranteed the bonds. As a result the rate of interest in these
bonds was low (~14%). The bonds had been rated as AA. It was proposed that the toll collections
from the MSRDC's projects would be used to pay the interest obligations on the bonds. In case of the
Mumbai Pune Expressway (MPE), it was estimated that during the initial years when the toll
collections were not high enough to service the interest obligations, alternative revenue source such
as the sale of land along the highway would be considered. They had even laid telecom ducts along
the sides of the expressway hoping that these could be leased and would serve as an additional
source of revenue.

Estimated Savings on account of the MPE:
1. Savings in annual fuel consumption because of reduction in congestion: Rs 80-90 crore
2. Reduction in Vehicle operating costs as compared to a similar distance elsewhere with lower
traffic congestion: Rs 100 (from Rs 160 - Rs 60)
3. Reduction in J ourney time between Mumbai and Pune: 2 hrs
4. Reduction in the accident rate. (Currently 410 accidents p. a.). Reduction in insurance cost: 49
cr per annum.

Traffic and Toll Income Projection
The vehicular traffic in the Mumbai Thane Pune belt was 60755 PCU in the year 1996 and is
expected to reach 100000 PCU by the year 2004 requiring a ten-lane corridor between Mumbai and
Pune. This belt also contains 72 per cent of factories, provides 77 per cent of industrial employment,
control 88 per cent of working capital, and yielded 86 per cent of total state industrial output.

Traffic Profile on existing NH4:

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The Mumbai to Pune 94-kilometre Expressway project had initially been budgeted at around Rs.
1,600 crores. Finally Rs. 2,136 crores was spent on it: a cost escalation of about 30 per cent! With an
average initial debt repayment interest of 13 per cent, the total liability is now a whopping Rs. 3,000
crores. In a move to justify the construction when the proposal was still on the table, its proponents
had projected that nearly 50,000 passenger car units (PCUs) would be using the expressway every
day by 2004. Today, in 2011, the actual number of vehicles using the expressway daily is only
36,000. With a majority of these being cars (one car =one PCU; one bus =2.5 PCUs), the present
volume of traffic on the expressway is estimated to be only about 25,000 PCUs.
The Toll rates proposed were as follows:

Toll Plaza's are provided at 4 locations. Toll will be collected at these locations from vehicles using
the expressway. Toll rates will depend on the distance covered by the vehicles. The toll rates for
the use of the expressway for 95 km from Kalamboli to Dehu Road are as follows :-




Type of Vehicles Rates Minimum
Car 100.00 60.00
Light vehicles & mini buses 155.00 95.00
Trucks 215.00 130.00
Buses 295.00 180.00
3 Axle vehicle 510.00 310.00
Multi axle vehicle 680.00 410.00
Rates in Rupees


The toll collections were estimated considering that around 40 -50 % of the traffic on the NH4 would
divert to the expressway. The majority of users were expected to be trucks and Multi axle vehicles
and they would contribute a significant amount of revenue. Accordingly the toll rates for the
expressway had been designed. There was a lot of risk involved especially if the traffic growth did not
match up to the expectations. But MSRDC was optimistic on this count, and it was widely perceived
that in addition to the current users of the roads, there would be growth on account of extensive
containerization at the J NPT and that most MAV's would use the expressway instead of the existing
road. This would further the MSRDC's goal of increasing the efficiency of transportation in the sector,
since with the encouragement to MAV's, lesser number of vehicles could carry larger loads.

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Key Takeaways of MPE (Mumbai Pune Expressway)

The Mumbai Pune express highway is considered to be a success story and hence other state
governments are closely watching the activities of MSRDC. It is considered to be the finest example
of public private partnership in road sector development. But the very aim of attracting aim of
involving a full private participant failed in these case as not even a single international infrastructure
company bid for the project and only one Indian company, reliance, bid for the project inspite of many
incentives provided by the government like the guaranteed 20% return on investment, a promise of
rapid and single window approval, tax incentives and reduced duties on imported equipment for all
investments in industry, and, allowing up to 40 per cent government support to the project, not a
single international infrastructure company bid for the project. Private sector entrepreneurs are
allowed to recover their investments first, followed by the government. The government finally did not
accept any of the competitive bids and the responsibility for constructing the road and its subsequent
management was entrusted to the MSRDC 1997. A number of reasons may be cited for the failure to
attract private participants. Foremost among them is the uncertainty related with toll-based system
where the developers are themselves responsible for recovering their investment. Private participants
are unsure as to if they would be able to recover their investment due to uncertainty in traffic density
and attendant risk. And also due to the fluctuations in real estate cost the valuation of subsidy through
free allotment of land by the government is difficult. The later part of this paper would try to look at
various alternatives to BOT scheme, which may help in attracting more private participants to road
sector development.

Discussion Points

1. Was the Expressway really needed?
2. Why was the Private Bid rejected?
3. The importance of Political Will
4. The use of PMC's
5. Contractual Issues
6. Speedy Implementation
7. Financial Viability
8. Is Financial Viability Important?

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Reference:
1. MSRDC - http://www.msrdc.org
2. http://www.roadtraffic-technology.com
3. http://www.punediary.com
4. Ministry of Road Transport and Highways (2002), www.morth.nic.in
5. National Highway Authority of India (2002), National Highways Development Project, www.nhai.org
6. Amrut Nashikkar, Nirav Shah IIT Kanpur Expressway : Mumbai Pune
7. Bongirwar, P.L and Momain, S.S.Theme: the Mumbai Pune expressway: From concept to
commissioning