SUBJECT CODE: CEN-431 CREDITS: 4

COURSE TITLE: Advanced Highway Engineering

Objective:

To provide the advance knowledge of highway

engineering related to materials, design of flexible &
rigid pavements and its construction and maintenance.
DETAILS OF THE COURSES

1. Introduction: 2. New Road Materials:

IRC Vision-2021 Alternate forms of aggregates
Rural Road Vision – 2025 Theory & specification of fillers
Comparison & significance Additives
Financial analysis of highway projects Emulsions & Cutbacks

Modified Binders
2. New Road Materials:

Mix designs- Marshall

(Asphalt Institute MS-2),
Requirements of mix
3. Pavement Structure –Soil Interaction

Tests on soil

 Plate load  Importance and functions of

 CBR each layers of pavement
and subgrade
 Triaxial
 Strength of pavement
materials
4. Design of Flexible Pavements
Methods
Empirical  Design factors
Semi-empirical
Analytical
California bearing ratio
Triaxial
Mcleod & Burmister
Indian Road Congress
5. Design of Rigid Pavements

 Design factors  IRC method of design

 Load & temperature stresses
 Load transfer devices
 Design of dowel & tie bars
 Joints requirements and
functions
 Construction techniques &
specifications
 Quality control tests
6. Stabilized Roads

 Aggregate mixtures  Problem related to

 Proportioning drainage
 Types of stabilizations  Control seepage
 Advantage &  Capillary rise
limitation
7. Pavement evaluation Techniques for Functional and
structural Evaluation

Benkelman Beam Deflection method

 Flexible & rigid

overlays
8. Maintenance of Pavements

 Routine and Periodic  Failure of flexible and rigid

Maintenance pavements
 Special repairs  Cracking
 Maintenance management  Settlement
system  Frost heaving & mud
pumping in rigid pavements
 NATIONAL ROAD DEVELOPMENT PROGRAMMES
Role of transport in modern society & A country’s economy

Transport is a key infrastructure of a country.

A country’s economic status depends upon how well served the

country is by its roads, railways, airports, ports, pipelines and
shipping etc. The economy of India is a developing mixed
economy.
To make a point about the importance of roads..
Former American President John F. Kennedy quotes
"American roads are not good because America is rich,“
"But America is rich because American roads are good."

AUTUMN
 NATIONAL ROAD DEVELOPMENT PROGRAMMES
The rate at which a country’s economy grows is very closely linked
to the rate at which the transport sector grows.
In the case of our country (India), it has been found that while
economy grows at a certain rate, say r% per annum, road transport has
grown at 2r%.

The multiplier (2 in this case ) is commonly known as the Elasticity

of transport demand with respect to GNP.

India's economy grew at around 3.5% during 1951-1980 and road

transport grew at around 7.5% during that period.

AUTUMN
 Since, 1980, the economic growth has been around 5%, and the
road transport growth was around 10%.

India is the world's sixth-largest economy by nominal GDP and the third-
largest by purchasing power parity (PPP). After the
1991 economic liberalisation, India achieved 6-7% average
GDP growth annually. In FY 2015 and 2018 India's economy became the
world's fastest growing major economy, surpassing China.

As India is now poised for a 8-9% economic growth, road transport can be
expected to grow at 12-14%, even assuming it to be 1.5.
 GDP & GNP COMPARISON
GROSS DOMESTIC PRODUCT (GDP) GROSS NATIONAL PRODUCT (GNP)

 It is an estimated value of  It is also an estimated value

the total worth of a of the total worth
country’s production & production & services, by
services, on its land, by it citizen of a country, on its
land or on foreign land,
nationals and foreigners, calculated over the course
calculated over the course on one year.
on one year.
 GDP & GNP COMPARISON
GROSS DOMESTIC PRODUCT (GDP) GROSS NATIONAL PRODUCT (GNP)

 It is an estimated value of  It is also an estimated value

the total worth of a of the total worth
country’s production & production & services, by
services, on its land, by it citizen of a country, on its
land or on foreign land,
nationals and foreigners, calculated over the course
calculated over the course on one year.
on one year.
Formula for calculation of
GDP GNP

 GDP = consumption +  GNP = GDP + NR (Net

investment + (govern income inflow from assets
spending) + (exports- abroad or Net income
imports) receipts) – NP (Net
payment out flow to foreign
assets)
Uses & Applications
GDP GNP

 It is being used for business  It is being used for business

& economic forecasting & economic forecasting
 Its application is to see the  It’s application is to see how
strength of a country’s local the nationals of a country
economy are doing economically
India transport sector comprises of several modes, viz.:

Railways
Roads and Road Transport
Air transport
Ports
Inland Waterways
Shipping
Pipelines

Of all these, roads and railways are the principal modes of

surface transport.

Road transport has been wresting a greater share from the

railways over the past because of several advantages such as:
The share of road: rail currently is about 85:15 in passenger
transport and 70:30 in freight transport
Flexibility
Door-to-door service
Quicker movement

Road transport also poised several disadvantages such as :

Poor record of safety

Environmental pollution
High energy consumption
CLASSIFICATION OF ROADS IN INDIA
In India, urban & non-urban roads are classified into the following classes:
1. Expressways
2. Arterial Streets
3. Sub-arterial Streets
4. Collector Streets
5. Local Streets
Non-urban Roads
1. National Highways (N.H.)
2. State Highways (S.H.)
3. District Roads
(i) Major District Roads (M.D.R.)
(ii) Other District Roads (O.D.R.)
4. Village Roads (V.R.)
Expressways
 This is the highest grade type of highway with
access ramps, lane dividers, etc., for high-speed
traffic.
Arterial The primary function of an arterial street is to deliver traffic from
Streets collector street to expressways. In such street, intersections are often
reduced to increase traffic flow.

Sub- A sub-arterial road is a road connecting arterial roads to areas of

arterial development, and carrying traffic directly from one part of a region
Streets to another
Collector Streets/distributor roads
 The basic purpose of collector streets is to
collect traffic from local roads, and distribute it
to arterial roads

 These roads have the lowest speed limit, and

Local roads
carry low volumes of traffic. In some areas,
these roads may be unpaved.
 ADMINISTRATION OF RAODS UNDER OTHER CENTRAL
MINISTRIES
Types of Roads
National Highways (NH)
Roads in military areas
Roads in areas around railway lines
Roads in Cantonment areas
Roads in North Eastern and
Western Border
Rural Roads (Village road)
Urban roads & transport
Control & management by
Central or State Government & in some special case CPWD
& BRO
Military Engineering Service (M.E.S.). These roads are
financed by the Ministry of Defence
Ministry of railways (construction, maintenance)
Ministry of Defence
BRO (PM as chairman & Defence Minister as Dy. Chairman)
Ministry of Rural Development acts as the nodal organisation
Ministry of Urban Development (Urban roads are under the
jurisdiction of municipalities and local bodies)
TYPES OF TRANSPORT PLANS
Transport plans are prepared for a variety of needs. In fact, there is a hierarchy
of transport plans which is clearly seen.
Transport plans are a part of the overall development plan of the country.
The types of plans and the hierarchical structure are indicated below:
National Plan

National Transport Plan

This is the highest level of transport planning in national level
Which considered the economic development policies for the Regional Transport Plan
country (Five Year Plans in India) (State or region)

Local Transport Plan

(District, city or town)
Fig. 1. Hierarchy of Plans
 NATIONAL ROADS DEVELOPMENT PROGRAMMES

The tranport sector plans in the Five Year Plans was the only attempts made in the
country to evolve national transport plans. These plans have poised few limitations
such as:
1. Being part of overall national economic plan, it is not possible to detail out the plan
of various sub-sectors. It is left to the individual Ministries to details out the plan of
their sub-sector.
2. The plans have a short horizon period of five years. Since transport needs can be
visualized to a degree on a longer time horizon, of say 20 years, the short-term
plans suffer from a limited vision and perspective.
Therefore, Twenty Year Road Plans have been introduced.
TWENTY YEAR ROAD PLANS (long-term national plan)

1. Nagpur Plan (1943-63)

This was the first long-term national road development plans ever had which was
formulated in 1943 by the Chief Engineers of the various provinces.
2. Second Twenty Year Road Plan (1961-81) or Bombay Road Plan
In fact, the Nagpur plan was intended for the period 1943-63, but the target road
length was completed earlier in 1961. Hence, the next long term plan for the twenty
year period was kept from 1961-81.
This plan envisaged overall length of 10,57,330 km by the year 1981.
The cost of the plan has been worked out to be Rs. 5,200 crores based on 1958 price
level for a period of 20 years from 1961.
Five different formulae were framed to calculate the lengths of NH, SH, MDR, ODR and
VR
Lucknow Plan or Third Twenty Year Road Development Plan
(1981-2001)

Under this plan, the future road development was based on the revised classification
of road system consisting of primary, secondary, and tertiary road systems
 IRC VISION 2021
The Indian Roads Congress have prepared a Vision-2021 document for road
development in India. The salient features of the Plan are:

Road category Achievement till Targets for 2021

1. The road 2000 (km) (Km)
network shall be
Expressway - 15,766
expanded as
under: National Highways 57,700 80,000
State Highways 124, 300 160,000
Major District Roads 320,000
Other District Roads 29,94,000 No target suggested
Village Roads
IRC VISION 2021

2. Half the National Highway length should have four/six lanes, and the remaining
half should have two-lane carriageway with hard shoulders.
3. 10,000 Km of State Highways should have four-lanes and the balance should
have two lanes
4. Forty percent of the major District Roads should have two lane carriageways.
5. The target for basic access to village shall be as under:
(i) Villages with population above 1000 ------ Year 2003
(ii) Villages with population 500-1000 ---------Year 2007
(iii) Villages with population below 500 ---------Year 2010
6. Maintenance of existing assets should receive adequate attention.
7. Research and Development activities in the road sector should receive good
attention.
IRC VISION 2021

8. Alternative sources of funding such as toll financing, creation of a dedicated Road

Fund through additional levies on fuel.

9. Upgradation of construction technology through adoption of innovative

procedures and specifications should be favoured.

10. Road safety should be enhanced through engineering measures.

11. Environments concerns caused by road and road traffic should be addressed.

12. Training of engineers should receive attention.

13. Greater recourse to Public-Private-Partnership in road projects should be taken.

 RURAL ROADS, VISION 2025

The Indian Roads Congress have drafted a Rural Road Development Plan, Vision
2025. The salient features of the Plan are:
1. Master Plans should be prepared for Rural Roads showing the Core Network
which gives accessibility to each village. All future programmes should strictly
conform to this network.
2. All habitations with a population of above 100 will be connected by all weather
roads.
3. It is estimated that length of 2,90,000 Km of new roads will be needed to
achieve full connectivity. Out of this 40,000 Km will be black-topped and the
remaining 2, 50,000 Km will be gravel. The outlay required is Rs. 26,000 crores,
besides Rs. 66,000 crores already taken up.
 RURAL ROADS, VISION 2025

4. Upgradation of existing Rural Roads (about 1,237, 000 Km length) shall be taken
up, at a cost of Rs.1,64,000 crores.

5. The maintenance of the Rural Road network will require Rs. 7,500 crores every
year.

6. Strategies to cut the cost of Rural Roads shall be worked out, which include
maximum use of locally available materials, soil-stabilization, adoption of gravel
road and use of low cost water crossings, and adoption of stage construction
concepts.

7. Greater emphasis shall be given to the adoption of tractor-bound technology for

construction and maintenance.
Expressway length in selected countries
Car ownership Rates (cars per 1000 persons)
FINANCIAL ANALYSIS OF HIGHWAY PROJECTS

Highway construction is a major civil engineering activity which involves large

sums of investment.

Construction of a six-lane expressway may cost Rs. 5-10 crore per kilometer.

A well-designed rural road with 3.75 m carriageway, shoulder, and cross-

drainage works may cost Rs 6-25 lakh depending on the construction
condition.

Proper economic evaluation is , therefore, an important aspect of highway

projects.
FINANCIAL ANALYSIS OF HIGHWAY PROJECTS
Study of highway economics and finance mainly involves the understanding
of various cost components of highway projects,

• the prioritization of various alternative highway projects,

• decision on the scheme of investment in a project at its various stages,
• funding sources, and
• policies for road projects
Some terminologies used in economic analysis
Time horizon or Analysis Period:
The investment for highway construction, maintenance, and its benefits are
spread over a time span, called the time horizon of economic assessment.
This is generally elected as twenty to thirty years for a highway project,
depending on the policy or type of road.

Interest Rate:

Money earns its interest intrinsically. Interest rate is the return obtained
after the end of the year as % of the capital invested at the beginning of
the year. It can either be at a simple rate or be compound rate.
Inflation:

The construction of a major highway project takes a number of years, and

meanwhile the cost of material, labour, and equipment; undergoes price
escalation as a result of inflation.

At the same time, due to inflation, the Vehicle Operating Cost (VOC) increases,
thereby reducing the benefit.

Thus while deciding the benefit-cost aspects, the effect of inflation also needs
to be considered in all cost and benefit components.
Salvage Value
Salvage value, S, is the worth of the structure at the end of the analysis period.

This value is carried over to the next analysis period.

There can be different criteria for calculating the salvage value.

If, after the expiry of the first analysis period, it is assumed that the pavement
materials would be recycled, than the costs of existing pavement materials (to
be used for recycling) are considered in computation of salvage value.
Salvage Value
Alternatively, if the pavement life is extended further by overlaying, in the
next analysis period, the salvage value can be calculated as

S = [ 1- (Y/X)] Onm

Where Y is the number of years between the last overlay (which is done in the
year nm) and the analysis period for which Onm was the cost incurred, and X is
the number of years the pavement is expected to actually serve.
This is based on the assumption that the service life of the last resurfacing
overshoots the analysis period, and accordingly a proportionate salvage is
estimated.
Present Worth
Present worth is the total cost of the project, when investments in various years
(during the analysis period) are brought back to the equivalent worth of the
present year.
The present worth can be expressed in the form of the following equation
nm
1 1
Present worth = C + ∑ Ok x -Sx nm -- (1)
K = n1 (1 + r) nm (1 + r)
C is the cost of construction
n1 is the first year in which major maintenance (say, overlay) is done
nm is last year within the analysis period in which a maintenance job is carried out
Ok is the cost of maintenance in the kth year
S is the salvage value and r is the discount rate
As a routine maintenance work, a sum of Rs. 20,00,000 each year is to be
spent on a particular stretch of a highway during the third year, fifth year, and
the seventh year. Calculate the total present worth of these expenditures, if the
annual discount rate is 12% (compound).

The present worth of the maintenance investment is

1 1 1
+ +
20,00,000 x (1+0.12) 3 5 7
(1+0.12) (1+0.12)

= Rs. 34,63, 080

Capital Recovery Factor
The concept of capital recovery factor is used only when the recurring investments
made at different periods of time are brought back to the equivalent investment made
at the beginning of the project.

Take the example of the middle term of eq. (1), using the following simplifications:
(a) Maintenance is done periodically in each year
(b) The maintenance expenditure is always the same, say x.
(c) The total maintenance expenditure calculated taking the first year as the base
year is equivalent to a one-time expenditure y. Then,
N
1 Where N is the analysis period. Or
Y=∑Xx
K=1 (1 + r )N -1
(1+r)k Y=Xx (2)
r(1 + r )N
The construction expenditure of a new highway was estimated to be Rs. 200
crore. It was decided that this money be raised from loans. Calculate the
installment to be paid each year, such that the loan is repaid in 15 years?
Assume the compound rate of interest as 10%.
Using capital recovery eq. (2)
(1 + r )N -1
Y=Xx
r(1 + r )N
(1 + .10)15 -1 = Rs 26.294 crore
200 = X x
0.1(1 +0.1 )15
ROLE OF ECONOMIC EVALUATION
For a developing country like India, there is serious shortages of resources
needed for economic development

The outlay for various sectors of economic activity is decided by planning at

the national level, keeping in view the national goals and policies

Within the allocation earmarked for the highway sector, a number of schemes
can be taken up, each enjoying its own urgency and attractiveness.

It thus becomes necessary to screen and evaluate the various alternatives so

that a wise decision can be reached on the most appropriate choice.
ROLE OF ECONOMIC EVALUATION
Economic evaluation is a rational approach at quantifying the future benefits
and costs of proposed highway improvements with a view to determine the
extend to which the projects will contribute to the goal of raising the living
standard of the people and their general welfare.

It ensures that the most worthwhile projects are given the highest priority.

The following are some of the specific objectives in carrying out an economic
evaluation:
ROLE OF ECONOMIC EVALUATION

1. To decide whether the scheme under consideration is worth investment at

all.
2. To rank schemes competing for scarce resources in order of priority.
3. To compare various alternative schemes and select the one most
economical.
4. To assist in phasing the programme (stage construction) depending upon
the availability resources.
Some basic principles of economic evaluation
Economic evaluation involves a number of basic principles as given below:

1. This makes it possible to choose the best of the various alternatives. The
question before the analyst is to suggest the most attractive of them.

2. In economic evaluation, all past actions are irrelevant. What is of prime

importance is the future flow of costs and benefits.

3. In highway projects, the appraisal is carried out from the view-point of the
nation as a whole, and is not restricted to any sub-set like the highway
agency, truckers, private motorists and bus operators.
Some basic principles of economic evaluation
4. Economic analysis should not be mis-understood with financial analysis.

5. Economic evaluation should take place within a set of established criteria such as
minimum attractive rate of return, interest rate etc.

6. Opportunity cost of capital and resources should be considered wherever they are
important.

7. The period of analysis need not be too long in view of the uncertainties associated
with the future traffic and benefits. In such case, the discounted cash flows of a
distant future period are insignificant. For highway projects, it is enough if the
analysis covers a period 15- 25 years after opening to traffic.
COSTS AND BENEFITS
1. In economic evaluation, the main objective is to compare the costs and
benefits of various alternative schemes and select the one, most
advantages.

2. The first step is to determine the costs and benefits.

3. There is a great deal of confusion in the designation of what constitutes

“costs” and what constitutes “benefits”.
4. Therefore, the most simple description is that the negative effects of a
scheme constitute the costs. They indicate the out-flows.
5. On other hand, the positive effects are called benefits and they represent
in-flows.
The economic evaluation of highway projects is generally done by
computing the total transport cost which consists of the following
component

1. Cost of construction of the facility

2. Cost of maintenance of the facility
3. Road user cost
4. Cost to the society

The Government, which is often the agency providing the facility, incurs
expenditure on constructing a road.
This includes land acquisition, earth work, road pavement and structures.
Govt. also invests money on maintenance and upkeep annually.
The road user cost, which is born by the actual user of the
Highway facility (Passenger, crew of vehicles, operator, consigner
of goods, pedestrian, cyclist etc.), is composed of:
1. Vehicle operating costs: 8. Fixed costs such as:
1. Fuel (i) Interest on capital
2. Lubricants (ii) Taxes
3. Tyre (iii) Insurance
4. Maintenance Labour (iv) Registration fee
5. Spare Parts (v) Fines, tolls, etc.
6. Depreciation (vi) Garaging charges
7. Crew costs (vii) Permit charges
(viii) Commission on booking
(ix) Loading and unloading charges
(x) Overhead charges such as rent,
salary, electricity, postal,
telephone, stationery etc.
2. Travel time costs
a) Time value of vehicle occupants
b) Time value of goods in transit
c) Time value of vehicles in transit

3. Accident Costs
a) Cost of fatality
b) Cost of injuries
c) Cost of damages to property
Cost to the society

a) Impact on the environment (noise pollution, air pollution, vibration)

b) Loss of aesthetics
c) Changes in land values
d) Land severance
e) Discomfort and inconvenience
What are the factors that affect the operating costs?
Vehicle operating costs are affected by a number of factors such as:
1. Vehicle factors : (i) Age (ii) Make (iii) Horse-power, engine capacity
(iv) Load carried (v) Condition of vehicle (vi) Type of fuel
used (vii) Level of maintenance input
(viii) Types of tyres (rayon, nylon, radial, ply, cross ply
etc.)
2. Roadway factor:
(i) Roughness of the surface (ii) Type of surface (iii) Pavement width
(iv) Horizontal curvature (v) Vertical profile (vi) Urban or rural location
(vii) Type and condition of shoulder (viii) No. of junctions per km.
3. Traffic factors :
(i) Speed of travel
(ii) Traffic volume and composition

4. Environmental factor:
(i)Altitude
(ii) Rainfall
(iii) Temperature
ECONOMIC EVALUATION TECHNIQUES

The methods commonly adopted for economic evaluation are:

1. Net Present Value Method (NPV)

2. Benefit/Cost Ratio Method (B/C ratio)
3. Internal Rate of Return (IRR) Method
Net Present Value (NPV) Method
 This method is based on the discounted cash flow (DCF) technique.

 In this method, the stream of costs and benefits associated with the project
over its time horizon is calculated and is discounted at a selected discount
rate to give the present value.

 Benefits are treated as positive and costs are treated as negative.

 Any project with a positive NPV is treated as acceptable.

 In comparing more than one project, a project with the highest NPV is
selected.
 The NPV is algebraically expresses as:

B1-C1 B2-C2 Bn-Cn

NPV0 = (B0-Co)+ + ……….+ ………. (1)
(1 + i) (1 + i)2 (1 + i)n

NPV0 = Net Present Value in the year 0

Bt =Value of benefits which occur in the year t
Ct = Value of costs which occur in the year t
i = discount rate per annum
n = number of years considered for analysis
Benefit-Cost (B/C) Ratio Method
 There are a number of variations of this method, but a simple procedure
is to discount all costs and benefits to their present worth and calculate
the ratio of the benefits to costs.

 Negative flows are considered costs, and positive flows as benefits.

 Thus, the savings in the transport costs are considered as benefits.

 If the B/C ratio is more than one, the project is worth undertaking.
Internal Rate of Return (IRR) Method
 IRR is the discount rate which makes the discounted future benefits equal
to the initial outlay.
 In other words, it is the discount rate which makes the stream of cash flows
to zero.
 Equation (1) can be arranged as below, assuming B0 = 0

B1-C1 B1-C1 Bn-Cn

 Co = + +……………..
(1 + i) (1 + i)2 (1 + i)n
n Bt-Ct
=∑ ………. (2)
t=1 (1 + i)t
 The solution to the above equation can be done by trial and error, a
radar tedious process.
 With computer programme, the work is rendered very simple.
 Example 1
The cost of improving an existing road, 20 km long, is Rs. 5.00 lakhs per km.
The (i) road user costs, with and without the improvements, (ii) accident costs,
with and without improvement, and (ii) maintenance costs, with and without the
improvements are tabulated in Table 1 for a 10-year period after the completion of
the improvements.

Assuming a discount rate of 10%, find out whether the project is economically
justifiable.

Use the NPV method.

Problem
Road User Costs Accident Costs Maintenance Costs

With Impr. Without With Impr. Without Impr. With Impr. Without
Year (t) Impr. Impr.
1 2 3 4 5 6 7
0 - - - - - -
1 105.5 126.5 1.1 3.1 3.5 2.5
2 110.3 132.2 1.1 3.1 3.5 2.5
3 115.8 138.9 1.2 3.5 3.5 2.5
4 121.6 145.8 1.2 3.7 3.5 2.5
5 127.6 153 1.3 3.8 3.5 2.5
6 134 161 1.3 4 3.5 2.5
7 140.7 168.9 1.4 4 3.5 2.5
8 147.8 177 1.5 4.4 3.5 2.5
9 155.1 186.2 1.6 4.7 3.5 2.5
10 162.9 195.2 1.6 4.9 3.5 2.5
Solution:

Benefits (Bt)
Costs without Costs with
Improvement Improvement Bt-Ct Bt-Ct/(1+0.1)t
Year (t) Cols 3 +5+7 Cols 2 +4+6
0 0 100 -100 -100
1 132.10 110.10 22.00 20.00
2 137.80 114.90 22.90 19.92
3 144.90 120.50 24.40 18.33
4 152.00 126.30 25.70 17.55
5 159.30 132.40 26.90 16.70
6 167.50 138.80 28.70 16.20
7 175.40 145.60 29.80 15.29
8 183.90 152.80 31.10 14.51
9 193.40 160.20 33.20 14.08
10 202.60 168.00 34.60 13.34
165.92
-100
(+) 65.4
Cost of improvements = Rs. 20 x 5 = Rs. 100 lakhs

NPV = (+ Rs. 165.4 - Rs. 100) Lakhs = + Rs. 65.4 Lakhs

Since the NPV is positive, the project is economically justified.

Example: An existing single lane road, 30km long, is to be widened to two lanes.
The cost of widening is Rs. 10 lakhs per km. The vehicle operating costs, accident
costs and maintenance costs, with and without widening, for a 10 year period
are tabulated in Table below. The discount rate is 12%. Is the project worthwhile?
 Road User Costs Accident Costs Maintenance Costs
With Without With Without With Without
Year (t) widening widening widening widening widening widening
1 2 3 4 5 6 7
1 101.5 160.7 2.5 3.6 10 7.5
2 105.6 168.2 2.6 3.7 10 7.5
3 110.2 176.3 2.7 3.8 10 7.5
4 116.2 185.2 2.8 3.9 10 7.5
5 122.3 190.0 2.9 4.0 10 7.5
6 128.4 199.0 2.9 4.0 10 7.5
7 135.6 210.0 3.0 4.1 10 7.5
8 143.2 219.5 3.1 4.2 10 7.5
9 149.1 228.2 3.2 4.3 10 7.5
10 154.6 240.1 3.2 4.3 10 7.5
 Benefits (Bt)
(A) (B)
Without widening With Widening

Discounted Benefits
Year (t) Cols (3)+(5)+(7) Cols (2)+(4)+(6) (A) - (B) (Bt)/(1+0.12)t
1 171.8 114.0 57.8 51.61
2 179.4 118.2 61.2 48.8
3 187.6 122.9 64.7 46.05
4 196.6 129.0 67.6 42.93
5 201.5 135.2 66.3 37.6
6 210.5 141.3 69.2 35.05
7 221.6 148.6 73.0 33.02
8 231.2 156.3 74.9 30.25
9 240.0 162.3 77.7 28.01
10 251.9 167.8 84.1 27.07
380.39
Cost of the project = Rs 30 x 10 = Rs. 300 lakhs

Benefit/Cost ratio = 380.39/ 300 = 1.27, greater than 1.

Hence the project is economically justified.

 Comparison of the Various Methods of
Economic Evaluation
The three methods of economic evaluation discussed in this chapter have
their own advantages and short comings.
1. The B/C ratio method is very widely practiced by the highway engineers. It,
however, suffers from the following drawbacks:

(i) It requires an assumption of a discount rate, which should bear relation to the
opportunity cost of capital. It is, however, rather difficult to know the opportunity cost
of capital accurately.

(ii) The significance of the B/C ratio is ambiguous, and its relative value is difficult to
understand and interpret. For instance, if there are two proposals, one with a B/C
ratio of 1.05 and other with a ratio of 1.10, the difference is very difficult to
appreciate.
 (iii) It is somewhat confusing and difficult to decide which items should be
termed as costs and placed in the denominator and which as benefits and
placed in the numerator.

2. IRR Method:
This method is popular with international lending agencies like the World
Bank. It lends itself admirably well for use in a computer-aided design
model.
It avoids the need for selecting a discount rate initially. The rate derived
from computations can be easily compared with the market rate of
interest, with which economists, financial experts and bankers are familiar.
2. IRR Method:
Its disadvantage is that the computations are tedious and a solution can
be obtained only by trial and error.

3. NPV Method:

This method suffers from the same disadvantage as in case of B/C ratio
method in that a rate of discount has to be assumed.
Toll Roads
A toll road is a privately or publicly built road for which the road users
have to pay a fee.
Fees were traditionally collected by hand at toll booth, toll house, toll plaza,
toll station, toll bar or toll gate, but nowadays more tolls are implementing some
form of automatic or electronic toll collection.

A toll road is a privately or publicly

built road for which the road users
have to pay a fee.
Advantages & Disadvantages of Toll roads
1. Tolling is an efficient method of charging the actual road user and is an
equitable form of user taxation.
2. Toll roads are very well maintained
3. Toll financing creates a new revenue structure, independent of uncertainties
of future availability of funds
4. Toll roads get completed quickly since the companies raise funds at high
rates of interest
5. Toll companies enjoy complete autonomy, and thus they provide excellent
project control and good way-side facilities
6. Toll roads can be used as a traffic restraint measure to decongest roads.
7. When the Govt. budgetary funds are limited, private sector financed Toll
roads are the only alternative available.
Disadvantages of Toll roads

1. Since toll roads are constructed with borrowed capital, their costs
are high
2. The cost of toll collection is additional component of road cost
3. Delays are caused at toll collection plazas due to queuing
4. Roads are public goods and must be free. It is the duty of the
government to build and maintain good roads for general use of the
public. Tolling is double taxation, the road user having already paid
road taxes
INDIA’S EXPERIENCE ON TOLL ROADS
The Government of India and State Governments have over the past Ten
years turned their attention to throw open roads to the private sector to
supplement the budgetary provision.

As far as the Central Government is concerned, the National Highway Act

has been amended to permit private participation in roads.

The salient features of the Government of India policy on Private Sector

Participation in roads are as follows:
Salient features:
1. The policy of privatization will be implemented by the NHAI and in
exceptional cases by the State Public Works Departments
2. The basic principles in identification of NH projects for private investments
would be that the project is an approved project of the Ministry of Road
Transport & Highways and it is capable of yielding adequate financial
return.
3. The Government will provide support by carrying out all preparatory
works, such as:
(i) Feasibility study
(ii) Land for right-of-way and road side facilities
(iii)Relocation of utility services
 Salient features:
(iv) Removal of encroachments and resettlements and rehabilitation of persons
affected from the projects.
Depending upon financial viability, the cost for the above activities may
be recouped from the project.
4. Suitable traffic support/guarantee will be provided on a case to case
basis
5. Exemption will be given from import duty on identified high quality
construction plant and equipment
6. Foreign direct investments upto 74% would be permitted automatically.
Beyond that, proposals would need clearance of the Foreign Investment
Promotion Board.
 Salient features:
7. A five year tax holiday is available followed by a further five year period
of 30% exemption and this concession can be availed of in any 10
consecutive years during the first 20 years of operation (Section 80IA
(12) (ca) of the Income Tax Act, 1961)
8. Upto 40% may be excluded from Income Tax of the income derived by
financial institutions from finance they provide for infrastructure projects.
9. Exemption is available from Income Tax on the income from dividend and
interest on long term capital gain derived from investments in the form of
shares or long term finance to any enterprise set up to develop, maintain
and operate an infrastructure facility.
10 Subscription to equity shares and debentures are eligible for deductions
under section 99 of the Income tax Act.

11. Real estate development can made integral part of BOT projects to
enhance their financial viability
12. NHAI can provide capital grants to the developers of a road project for
project cost on case to case basis

13. NHAI can participate upto 30% of total equity of a company floated to
develop a road project
14. The ownership of the land for the highway construction and road side
facilities would continue to vest in Government. Mortgaging and
subleasing of this land for raising finances is not allowed. However, land
will be given on lease to entrepreneurs

15. Disputes resolution and arbitration would be under the Indian Arbitration
and Conciliation Act, 1996.
16. Entrepreneurs would be protected against force majeure situations
including political, non-political and legislative changes

17. There will be a standard concession agreement, which addresses the

concerns of various stake holders in the project.
The National Highways Authority of India have tried two models:

(i) Build Operate Transfer 9BOT)

The private entrepreneur build the road with his own funds (and in certain
cases augments his funds by the grant provided by the Govt.), operates
the road collecting toll for a specified concession period (20-30 years)
and transfer the facility at the end of the concession period to the Govt.

(ii) Annuity Payment:

The private entrepreneur build the road with his own funds and maintains
the road for a specified period. He does not collect toll, but is paid an
annuity sum for a specified period to cover his costs.
Though most of the four-laning projects of the National Highways Authority of
India are Government funded, a few are based on the BOT or Annuity
payment models.
Both BOT and Annuity payment models are successful.

An example of BOT: Delhi-Gurgaon six/eight laning

An example of Annuity Payment project: Belgaum-Karnataka border NH4

four lanning
 An example of an expressway built with Govt. funds, currently being
tolled, and being let out to a private operator for operating and
maintenance is the Mumbai-Pune Expressway

The NHAI are now privatizing the operations and maintenance of selected
sections of four-laned National highways.

The private operator collects the toll and maintains the facility over a specified
concession period , and pays the Government a quoted amount.