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ROADS April 2010
Advantage India Market overview Investments Regulatory framework Opportunities Industry associations
ADVANTAGE INDIA Roads April 2010
With the largest road network in the world, the Indian roads sector has evolved with a strong base for major players.
Roads contribute to economic development by improving connectivity, enhancing accessibility and promoting trade relations. They also facilitate opportunities for other industries through faster delivery of goods and services.
Strong base for economic growth
Liberal government norms
The Government of India (GoI) has permitted 100 per cent FDI in the roads sector and has also provided tax exemptions and duty free import of road-construction equipment and machinery.
In the past five years, the number of vehicles in the country has increased at an average rate of 10.16 per cent per annum. This has necessitated the need for better quality roads.
Number of vehicles on the incline
Thrust sector for government 3
The GoI is making significant investments through key projects such as the National Highway Development Programme (NHDP) Facilitates and the Pradhan Mantri Gram opportunities for Sadak Yojana to improve the other industries country’s road network.
ROADS April 2010 Contents Advantage India Market overview Investments Regulatory framework Opportunities Industry associations 4 .
50.nhai.000 sq km. www. is 2.31. Indian road network (length in km).3 million km.763 26. Broadly. accessed 21 January 2010.htm. aggregating a total length of 3.20.org/roadnetwork.” National Highway Authority of India website.548 1.410 • Roads are the most preferred mode of transportation and account for 85 per cent of passenger traffic and 65 per cent of freight traffic in India.000 33. it is 770 km per 1. In addition.899 4. In terms of land. .67. the road network in India is divided into the primary (the National Highways) and secondary system (the State Highways and major district roads).000 people.MARKET OVERVIEW Roads April 2010 Market overview … (1/3) India has one of the largest road networks in the world. in terms of population. the network comprises expressways and rural and other roads. Road density. 5 • • • Source: “Indian Road Network. 2008–09 Expressways National Highways State Highways Major district roads Rural and other roads Total length 200 70.75 km per 1.
Length in km The National Highways account for only 2 per cent of the total road length and carry 40 per cent of the total road traffic. about 27 per cent is single laned/intermediate-laned. and 19 per cent is fourlaned. 54 per cent is two-laned. Length of National Highways 6 .MARKET OVERVIEW Roads April 2010 Market overview … (2/3) • • Of the total length of the National Highways.
Financial structure of NHAI (US$ million) Year Cess funds 681.” “Department of roads transport and highways website.83 22. www.morth. Funds to implement road and highway projects are generally available from a number of sources.indiabudget.1 7 82.” Union budget and economic survey website.334. including budgetary allocations by the Central and State Governments.in. through private participation.58 228.nic.MARKET OVERVIEW Roads April 2010 Market overview … (3/3) • The State Highways and major district roads (MDRs) carry 40 per cent of the total road traffic and constitute 13 per cent of the total road length.67 315.13 500.17 78.50 63.89 1.69 372.21 33.92 55. Roads: Economic Survey 2008–09. 7 . accessed 26 January 2010 .nic.20 1.” www.63 Borrowings Budgetary support • 2005–06 2006–07 2007–08 2008–09 Sources: “Roads and highways.60 External assistance Grant Loan 104.452. the Central Road Fund and.40 93.96 268. accessed 26 January 2010.362. of late.00 329.80 1.39 145. multilateral agencies.in.54 312.
The project aims to develop more than 50. 8 .MARKET OVERVIEW Roads April 2010 Government initiatives — the National Highways … (1/2) The GoI has undertaken several initiatives to optimise the development of the roads sector. National Highway Development Programme: • • The GoI has launched the NHDP to improve and develop the National Highways in the country.000 km of National Highways in seven phases.
478 3.htm.500 163 1.000 41 NHDP Phase VII 700 NHDP Total 33.org/roadnetwork.269 659 193 14.300 4.443 6.” National Highway Authority of India website. accessed 13 April 2010.926 NHDP Phase V 6. *: GQ stands for Golden Quadrilateral **: NSEW stands for North South East West Corridor 9 .109 1. 2010 Projects Total length (km) Already four-laned (km) Under implementation (km) Contracts under implementation (No) Balance length for award (km) GQ* 5.MARKET OVERVIEW Roads April 2010 Government initiatives — the National Highways … (2/2) Status of NHDP projects as on February 28.863 1.270 6.068 NHDP Phase VI 1. www.223 6 6 9 20 210 14.705 8 5.nhai.766 80 NSEW** Phase I and II 7.950 13 - 113 590 59 6.249 Source: “About NHDP.800 13.804 Port connectivity 380 274 100 Others 965 899 46 Total by NHAI 34.455 12.689 NHDP Phase III 12.846 5.
000 villages with a population of 1. Under the programme.20 • 10 .MARKET OVERVIEW Roads April 2010 Government initiatives — rural roads … (1/2) Bharat Nirman Programme: • The Bharat Nirman Programme was introduced in 2005 to provide road connections to about 23.405.019.000 or 500 in case of hilly or tribal areas.18 155.) New connectivity (in km) Road upgrade (in km) Total achievement up to March 2009 32. the GoI has released funds worth US$ 7.52 billion (INR 361 billion) and has constructed about 58 per cent of roads until March 2009. Construction of rural roads under the Bharat Nirman Programme Roads Habitations coverage (in nos.269 85.
73 2. 11 . The Eleventh Five Year Plan (2007–2012) has projected an investment requirement of US$ 8.75 The PMGSY program was launched in December 2000 to provide connectivity to isolated rural habitations. www.405 Expenditure (US$ million) 854.25 1.MARKET OVERVIEW Roads April 2010 Government initiatives — rural roads … (2/2) Pradhan Mantri Gram Sadak Yojana (PMGSY): • Construction of rural roads under the PMGSY Year 2005–06 2006–07 2007–08 2008–09 Length of roads work completed (km) 22.23 3.in.95 million (INR 413.710 41. Planning Commission FY09 annual report.231 52.nic. • Sources: “Roads: Economic Survey 2008–09.158.521.613.” Union budget and economic survey website.212.indiabudget. accessed 26 January 2010.891 30.470 million) in rural roads under the PMGSY.
MARKET OVERVIEW Roads April 2010 Government initiatives — other initiatives … (1/2) Special Accelerated Road Development Programme in the North-Eastern region (SARDP-NE): • The SARDP-NE was set up to provide road connectivity to state capitals. The first phase. and is scheduled for completion by 2012–13. Currently. The project is to be executed in two phases.039 km of the National Highways and 757 km of state roads. worth US$ 3. which consist of 2.184 km of the National Highways and two-laning of about 4. district headquarters and remote places of the northeast region.576 km of state roads.796 km of roads. The project envisages two-/four-laning of about 5. the second phase is approved only for detailed project report (DPR) preparation and is pending approval from the GoI for investment.69 billion (INR 177. The second phase involves the construction of 4.825 km of the National Highways and two-laning and improvement of state roads.4 billion) involves the construction of 2. • • • 12 .
08 billion (INR 100 billion) through the issue of tax-free bonds. the GoI has allowed India Infrastructure Finance Company Limited (IIFCL) to raise US$ 2. accessed 26 January 2010.MARKET OVERVIEW Roads April 2010 Government initiatives — other initiatives … (2/2) Other incentives: Stimulus packages: •In response to the 2008-09 global slowdown. www. •The GoI has also allowed IIFCL to refinance 60 per cent of commercial bank loans under the ‘takeout financing scheme’ for public-private partnership (PPP) projects in infrastructure over a period of 15 to 18 months. Source: “Roads: Economic Survey 2008–09.nic.in.indiabudget.” Union budget and economic survey website. particularly for road and highway projects under Stimulus Package I. 13 .
as compared to US$ 30. Road passenger traffic grew at a CAGR of 13. the restructuring of future road projects and the formulation of the new Tolling Policy. This can be primarily attributed to the introduction of policy measures such as the standardisation of bidding documents. 14 .MARKET OVERVIEW Roads April 2010 Growth drivers The GoI’s thrust on infrastructure investment has increased • According to Planning Commission estimates. the launch of viability gap funding.4 billion is expected to be invested in the roads sector during the Eleventh Plan. the contribution of the private sector in road projects has increased considerably.8 per cent in the Tenth Plan to 27. For instance.9 per cent between 2000–01 and 2004–05. 2008. • Significant growth in freight and passenger traffic • • Road freight traffic grew at a CAGR of 6.18 billion in the Tenth Five Year Plan (2002–07). around US$ 65. model concession agreements (MCAs).7 per cent between 2000–01 and 2004–05.83 per cent in the Eleventh Plan. the contribution of the sector in road and highway projects has increased from 4. The private sector’s participation in road infrastructure has increased • Over the years.
Tamil Nadu. Uttar Pradesh Rajasthan and Madhya Pradesh. • The Delhi–Noida Toll Bridge. including Andhra Pradesh.MARKET OVERVIEW Roads April 2010 Key trends … (1/2) • Driven by the comfortable liquidity position of the past few years and a buoyant economy. Karnataka. The East Coast Road . several private companies have expressed interest to invest in Indian infrastructure. particularly in roads and highways. through the PPP mode. • The PPP models commonly used in Indian road projects include build. Bangalore–Mysore State Highway (Phase I) are some of the completed PPP projects. • Some states.Vadodara–Halol Toll Road. Gujarat. have formulated policies and established PPP cells to facilitate private-sector participation in key road projects. operate and transfer (BOT) toll. and BOT annuity. Ahmedabad–Mehsana. Increasing scope of PPP 15 .
As a result. Over the years. and about US$ 0.51 km was brought under tolling. most foreign investors in the Indian roads seactor have formed consortiums with Indian companies to participate in the development of road projects in India. • • Tolling of roads • • 16 .35 billion (INR17 billion) was collected as user fee. construction companies are now being rewarded with large order books and portfolios of BOT projects. During 2008–09.MARKET OVERVIEW Roads April 2010 Key trends … (2/2) Strategic alliances with international players • With the GoI permitting 100 per cent FDI in the roads sector. The revenue target for toll in 2008–09 was US$ 0. the tolling of roads has become an acceptable mode of funding. a total road length of 1. User acceptance towards toll has also increased over time.33 billion (INR 16 billion).262.
the Old Mumbai–Pune stretch Andhra Expressway Limited. the Panipat–Jalandhar stretch Sources: Company annual reports Note: This list is indicative. Mumbai–Nasik Expressway Limited. Farukhnagar–Jadcherla Highway Bandra–Worli Sea Link. the Chennai–Tada stretch. 17 . Tambaram–Tindivanam Highway.MARKET OVERVIEW Roads April 2010 Key players Several infrastructure companies have entered the road sector space to become full-scale project developers. Jaipur–Kishangarh Highway. Badarpur Elevated Highway Project Coimbatore Bypass. Surat–Dahisar. Lucknow– Sitapur Expressway. Ahmedabad–Mehsana Toll Road. the Vadodra-Bharuch stretch Mumbai–Pune Expressway. Bharuch–Surat. Rajamundhry Expressway Limited The Pimpalgaon–Dhule section. Company DS Construction Limited GMR Infrastructure Limited Hindustan Construction Company Larsen & Toubro Limited Ideal Road Builders Infrastructure Developers Gammon Infrastructure Projects Limited Soma Enterprises Limited Key projects Delhi–Gurgaon Expressway. Sandur Bypass Project Tuni–Ankapalli Highway. Raipur–Anurag Expressway. Ambala– Chandigarh Highway.
ROADS April 2010 Contents Advantage India Market overview Investments Regulatory framework Opportunities Industry associations 18 .
IDFC. Ministry of Road Transport & Highways. October 2009. L&T Infrastructure Finance and Lehman Brothers Holdings Inc Date February 2008 April 2007 April 2009 January 2008 December 2007 Target Ashoka Buildcon Ltd IRB Infrastructure Developers Ltd Ashoka Buildcon Ltd Futura Infraprojects Ltd B. Seenaiah & Company (Projects) Ltd Value (US$ million) 180 65 50 40 38 Stake (%) 16 12 10 7 Sources: “The opportunity framework—Private equity in Indian Infrastructure.” Ernst & Young. 1H*. Goldman Sachs and Merrill Lynch Corporate Principal Investments Group IDFC Project Equity Frontline Ventures Amansa Capital.INVESTMENTS Roads April 2010 Investments … (1/2) Private equity (PE) investments • PE players have expressed active interest in India’s roads and highways. FY09 annual report. Companies in this space have successfully raised growth capital to fund their existing projects as well as other expansion plans. L&T Capital. via RAD.First half 19 . Some of the deals in this sector are: Top five PE deals in roads and highways (2006 — 1H* 2009) PE Investor IDFC Private Equity Deutsche Bank.
5 billion (INR120 billion).indiabudget.47 billion) and US$ 5. FY09 annual report.” Union budget and economic survey website.48 million (INR 263.706. have been allocated in 2008–09. reflecting a rise of more than 13 per cent over the previous year. The GoI has increased the allocation of funds under the PMGSY programme to US$ 2. funds worth US$ 0. accessed 11 March 2010.5 million).19 billion (INR 9.931 million) was incurred on rural roads under the PMGSY. recording a rise of 59 per cent over the BE in 2008–09.89 million (INR 129. 20 . as compared to US$ 3.INVESTMENTS Roads April 2010 Investments … (2/2) Government investments • The GoI has invested US$ 1.nic. which have been entrusted to the state public works departments (PWDs) and the border road organisations (BROs). The GoI has increased the allocation of funds to road transport in the budgetary estimates (BE) of 2010–11 to US$ 4. Ministry of Road Transport & Highways.14 billion (INR 198.94 billion (INR 93. • From April to December 2009. an expenditure of US$ 2.46 billion) were earmarked for rural roads.in. respectively. In 2008–09.94 billion).84 billion (INR 40.65 billion (INR 175. www. funds worth US$ 0. • • • • Sources: “Roads: Economic Survey 2009-10. For the maintenance of the National Highways.2 billion) for the development of the National Highways and state roads during 2009.20 billion) allocated in BE 2009–2010.
520 65.448.430 68.980 105.400 12. accessed 26 January 2010.69.690 799.150 248.pdf.890 11.090 547.760 9.000.410 7.720 214.850 77.690 798.300 11.” Secretariat for Infrastructure.33 Source: “Projection of investment in Infrastructure during the Eleventh Five Year Plan.796.310 181.43.130 12.000 2.220 10.380 13.520 1.280 72.330 15. Planning Commission website.130 63.890 592.520 365.980 206. www.840 10.000 12.infrastructure.in/pdf/Inv_Projection.010 83.730 129.340 39.69.730 187.510 8.150 74.710 100.790 683.414. 21 .120 214.190 518.75 2011–12 382.550 269.58.570 152.810 68.650 31.500 42.INVESTMENTS Roads April 2010 Projection of investments in roads and bridges during the Eleventh Plan 2007–08 National Highways (1) NHDP Public Other National Highways (Public) NHDP Private State roads (2) Public Private Rural roads: Bharat Nirman (3) SARDP-NE (4) Total INR million (1+2+3+4) Total (US$ million) 232.333.62 Total (Eleventh Plan) 14.33 2010–11 325.25 2008–09 246.660.890 49.100 122.170 188.770 11.41.810 120.570 63.180 110.090 238.37 2009–2010 271.820 14.710 147.gov.530 591.710 16.700 142.910 175.520 322.110 224.820 47.
ROADS April 2010 Contents Advantage India Market overview Investments Regulatory framework Opportunities Industry associations 22 .
The MOSRTH and the National Highways Authority of India (NHAI) administer the National Highways for policy formulation. monitoring and coordination of rural roads in India. The Ministry of Rural Development manages the policy development. The state PWDs and the road development corporations administer the State Highways and the major district roads. • • • 23 .REGULATORY FRAMEWORK Roads April 2010 Regulatory framework … (1/2) • The overall development of roads in India falls under the aegis of the Ministry of Shipping. Road Transport and Highways (MOSRTH). operation and maintenance.
www. 2000 Carriage by Road Act.in. 24 .nic. environmental issues and traffic movement in neighbouring countries.REGULATORY FRAMEWORK Roads April 2010 Regulatory framework … (2/2) • Various acts have been introduced for the management of road transport. 2007 Indian Tolls Act. 1988 Central Motor Vehicles Rules. 2008 Source: “Roads: Economic Survey 2008–09.1950 Motor Vehicles Act. accessed 26 January 2010.indiabudget.” Union budget and economic survey website. 1989 Central Road Fund Act. Some of the key acts include: • • • • • • Road Transport Corporation Act.
80 km of widening to eight lanes in the state of Delhi 25 .nic.) 2007–08 Performance of the NHAI Target 2.67 77 4 2008–09 Performance of State PWDs and BROs Source: “Roads and highways.00 34.REGULATORY FRAMEWORK Roads April 2010 Development of the National Highways Performance Physical performance Widening to four lanes (km) Construction of bridges (No) Construction of bypasses (No) Physical performance Improvement of low grade section (km) Widening to four lanes (km) Widening to two lanes (km) Strengthening of existing weak pavement (km) Rehabilitation/Construction of Bridges (Nos.153. accessed 26 January 2010.00 1 3 Achieved 47.54 910.) Construction of bypasses (Nos.00 2 2 Achieved 25.97* 950.58 35.00 92 8 Achieved 2.” Ministry of Road Transport & Highways website.morth.50 km of widening to eight lanes in the state of Delhi **This includes 2.00* 919.78 86 6 Target 3.00 107 3 Achieved 636.00 577.” “Department of Roads Transport And Highways.519.75 ** 1.00 5 11 Target 25.26 62.in.009.00 51.85 3 17 Target 80.203.885.176.34 1. *This includes 2.00** 1. www.00 706.
ROADS April 2010 Contents Advantage India Market overview Investments Regulatory framework Opportunities Industry associations 26 .
among others (NHDP Phase VII) 27 . the following projects are planned for 2009–2010 and beyond: • • • • • • Four-laning of 12.000 km of expressways (NHDP Phase VI) The development of ring roads.500 km (NHDP Phase V) The development of 1.83 billion (INR1.000 km of the National Highways (NHDP Phase IVA) Six-laning of GQ and some other stretches covering 6.OPPORTUNITIES Roads April 2010 Opportunities … (1/3) Several road projects in the pipeline • The GoI aims to build 12. 000 billion) in the toll collection mode.000 km of highways through the financial year 2009–2010 for US$ 20. Apart from completing ongoing projects under NHDP Phase I and Phase Il. bypasses.109 km (NHDP Phase III) Two-laning of 5. grade separators and service roads.
The construction sector in India is expected to grow at about 35 per cent between 2008–09 and 2012–13.OPPORTUNITIES Roads April 2010 Opportunities … (2/3) Significant potential for construction and EPC companies • Significant government investments in road space have created avenues of growth for construction and engineering procurement construction (EPC) players. • 28 .
around US$ 65. This will result in increased opportunities for private players as more projects will be awarded under the PPP mode. For instance.morth. The private sector will contribute 34 per cent of this amount. www. accessed 26 January 2010..OPPORTUNITIES Roads April 2010 Opportunities … (3/3) Private sector participation has increased • According to Planning Commission estimates.in/writereaddata/. Source: “Ministry of roads transport and highways— Outcome Budget 2009–10..4 billion is likely to be invested in the roads sector during the Eleventh Plan. in 2008–09: • Of the 94 projects awarded under the BOT (toll) mode./OB_2009_10_English6701085845. • 29 .nic. 9 have been completed.pdf. • Of the 25 projects awarded under the BOT (annuity) mode.” Ministry of Road Transport and Highways website. 43 have been completed.
ROADS April 2010 Contents Advantage India Market overview Investments Regulatory framework Opportunities Industry associations 30 .
Sector10.org. 25074200 Fax: 91-11-25093507.in 31 . 26185319 Fax: 91-11-26183669 E-mail: secretarygen@irc. 25093514 Indian Roads Congress Sector 6. New Delhi – 110 075 Phone: 91-11-25074100. New Delhi – 110022 Phone: 91-11-26185303 Secretariat: 91-11-26716778. 26185315. Parliament Street New Delhi –110001 National Highway Authority of India G 5 and 6.INDUSTRY ASSOCIATIONS Roads April 2010 Industry associations Ministry of Roads Transport and Highways Transport Bhavan 1. 26185273. Dwarka. RK Puram. (Near RBI Quarters). 26183669.
Conversion rate used: US$ 1= INR 48 32 .NOTE Roads April 2010 Note Wherever applicable. numbers in the report have been rounded off to the nearest whole number.
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