Delhi Gurgaon Expressway

Submitted by
Balaji M
 Background
 Stakeholders
Private Institution: DS Constructions
Public Institution: National Highway Authority of India (NHAI)
Independent Consultants: RITES Corporation
Governments: Haryana State Government and Delhi State Government
Salient Features
Cost: INR 10 Billion
Length of Expressway: 27.7 kms
No of Flyovers & Overpasses: 11
Toll Lane: 32 Lane State of the Art Plaza (Asia’s Biggest, World’s 3rd Biggest)
CCTV Surveillance till IGI Airport & SOS Telephony every 1.5kms
 Concession Agreement
Issues
 No Model Concession Agreement for Reference or Benchmarking Purposes
Very few details existed at the time of Contract for BOT basis (2002)
No inclusion of possible risks and complexities that could prop up in the project
 Highway Capacity Miscalculation & No Provisions for Capacity Augmentation in the next 20 Years
Service Quality to Users was abysmal
Parallel Competing Roads were provisioned to be developed but they were of inadequate size
Traffic levels in 2008 were above the estimated levels for 2012
 Toll Charges fixed without basing it on Road Volume (Also included a Positive Inflationary Tool for Toll Charges
Increase insulated from the Traffic Volume)
No Provision for decrease in Toll Charges with Increased Traffic Volume
100% WPI adjusted increase was allowed in Toll Charges in times of High Inflation
 Construction Phase
Issues
 Land Acquisition
Responsibility of NHAI with stiff penalties, still to no avail
 Precedent Conditions
Breach of Conditions Precedent related to Land handover, delays were made by NHAI
Further claims were made by DS Constructions. The initial cost to NHAI was INR 3 cr.
Additional claims also made. Excuse used to cover up 4 months delay in FC approval.
 Relocation
No major residential relocation was envisaged as project was about highway up-gradation
Majority of time spent on dealing with illegal commercial operations along the highway
 Utility Shifting (Considered as Encumbrances)
Delay in shifting of cables and power lines which were pre-construction activities
 Concession Agreement
 Capacity Augmentation Issue addressed
Based on Phased Development instead of High Cost Roads for catering to Projected Growth in the Long Term
Concession Period determination was based on present and predicted future traffic
 Toll Charges Exemption for Local Traffic
A monthly paid pass could be charged for local traffic leading to lower toll revenues
Increased VGF mechanism to make projects viable
Local Acceptance important to mitigate potential for protests for Project to become a Model Project
 Claims in case of authority’s inability to provide resources were better dealt with
 Safety Issues were clearly tackled
Tolling prohibited till Land used for Highway was made usable
Right of Way provision implemented, whereby 80% of the land acquired originally would be all the land needed to
obtain provisional certificate
 Financial Analysis
 Toll Charges were received and not shared by the private party
 If the total traffic count increased to more than 130,000, half the total revenue would be shared with NHAI
 Upfront Cost: INR 686.4 Cr (Concessionaire: INR 555 Cr)
 Grant: INR (61) Cr.
 NHAI Borne Cost: INR 131.4 Cr
 Corporate Tax Rate: 33.66%, Minimum Alternate Tax: 11.2% ; Tax Holiday for the 1st 10 years {Section 80(1a)}
 Huge Profit Potential for Private Party, as estimated traffic count was 76000 while the actual was around 96000
passenger vehicles daily
 An increase of 10,000 vehicles would lead to additional income of INR 7.3cr @ Rs 20/car
 No toll charges revision or concession period revisions were envisaged creating huge possibility of profiteering by the
private party for a long time
 Impact on Stakeholders
 More than desired profits could be skimmed by DS Constructions due to incorrect traffic projections

As toll prices could be changed with changes in WPI, DS Constructions could also benefit if inflation rose,
leading to perpetual growth in income while the costs were more one time and upfront in nature

Greater Traffic counts could lead to huge gains being made by DS Constructions

 Environmental NGOs protested the use of asbestos during the construction of the highway and also the huge
number of trees that were felled for Right of Way implementation

 Patrons were happy about the road but were not satisfied about its utility due to peak hour traffic congestion
and drivers inability to familiarize themselves to Tolling Process
 Lesson’s Learnt on Financial Implications
 DS Constructions
More than desired profits could be skimmed due to incorrect traffic projections
As toll prices could be changed with changes in WPI, DS Constructions could also benefit if inflation rose,
leading to perpetual growth in income while the costs were more one time and upfront in nature
Greater Traffic counts could lead to huge gains being made by DS Constructions
 NHAI
No financial reward directly from Toll Collection till traffic count is below 130,000 leading to loss of potential
income
 RITES Corporation
No Financial implication on the performance of the highway
 Patrons
With rise in inflation, toll prices would rise leading to greater outflow of disposable income
Multiple/Local users of the highway had to fork out a huge amount till the Model Concession Agreement was put in
place
 Lesson’s Learnt on Concession Agreement
 Risks Mitigated in the New Model
 Concession Agreement
 Capacity Augmentation Risks (Exposure:NHAI)
 Traffic based Toll Charges: Financial Risk
(Exposure: DS Constructions/Patrons)
 Resource Handover Delays: Operational
 Risk (Exposure: DS Construction)
 Safety Issues: Safety & Usage Risks(Exposure: DS
Constructions/NHAI/Patrons)
 Political Risk: Force Majeure Events with respect to
change in Political scene
 Going Concern Risk: If the operator is unable to run the
project successfully, then the lender’s financial exposure
is at risk (No Right of Substitution stated)
 Termination Risk: No stipulation stated with respect to
whether authority will buy out the venture in case
developer and lenders don’t get adequate returns, as the
latter cannot use the highway for recovery of funds
References

 https://nhai.gov.in/
 http://www.dsconstructiongwl.com/
 https://en.wikipedia.org/wiki/Delhi%E2%80%93Gurgaon_Expressway
 https://www.roadtraffic-technology.com/projects/delhi-gurgaon/
 https://circ.in/economic-regulatory-issues/er-case-study-19-2/