Indian Institute of Management

Ahmedabad

IIMA/PSG0084

LTTIL: Coimbatore Bypass Project

Mr Ramachandran, Senior Deputy General Manager, Development Projects, L&T
Transportation Infrastructure Ltd (LTTIL), Chennai, was reflecting on the meeting with the
Secretary, Highways, Government of Tamil Nadu, Collector, Coimbatore District, and the
National Highways officials on 18 September 2000. He was very disturbed. While the toll
collection from vehicles using the bypass road was progressing smoothly, collection at the
Athupalam Bridge segment of the project was facing tough challenges. This was creating an
unpleasant situation for LTTIL, the BOT operator of the project.
LTTIL reported a loss of ` 8.5 crores as of July 2000 on account of a number of vehicle users
refusing to pay toll at the Athupalam Bridge. The company had requested the Tamil Nadu
State Government for compensation, but the state government had not agreed. Through its
analysis, the state government stated that had LTTIL accepted the suggestions by the
Minister of Highways and Ports during January 1999, the loss could have been contained at
` 33.4 lakhs. Mr Ramachandran was therefore in a fix. Unless some agreement could be
arrived at, the losses would only mount. The situation seemed to be going out of control and
needed to be solved quickly.
Background
Coimbatore, the second largest city in Tamil Nadu, also known as the Manchester of the
state, was a prosperous industrial city. It was well connected by both the national highway
and state highway networks. The national highway No 47 (NH 47) passed through the city,
connecting Salem with Kanyakumari. Congestion within the city caused heavy traffic delays
and hence a need was felt to construct a bypass to the city. The alignment, traversing a
length of 27.67 km, was finalized in 1974. Land for a width of 40 to 45 m was acquired for
this purpose at the same time. However, construction was delayed due to inadequate
funding arrangements.
Given the trend of private sector participation in the development of road infrastructure, the
Ministry of Surface Transport (MoST), Government of India (GOI), floated a global tender in
September 1995 to select a private sector participant for the development of the Coimbatore
Bypass. LTTIL was the only firm which responded to the tender and submitted a conditional
bid to construct and operate the Coimbatore Bypass. The conditions in the bid included the
addition of, (i) a bridge (the Athupalam Bridge) over the Noyyal river on NH 47 in the city
(close to the city limits), and (ii) a rail overbridge (ROB) on NH 209 (Coimbatore-Dindigul
Road), to the project scope of the Coimbatore Bypass project. These segments would also be
tolled in order to improve the financial viability of the project.
The bid was discussed in detail with the state government. Based on the argument that the
27.67 km bypass road, linking the Southern (Coimbatore-Kanyakumari) segment of NH 47
Prepared by Professor G Raghuram and Ms. Deepa Kheskani. This case is significantly based on a
note by Mr M Abul Hassan, (Former) Secretary, Highways, Government of Tamil Nadu, and A Note
on Toll Collection in Coimbatore Athupalam Bridge, Government of Tamil Nadu.
Teaching material of the Indian Institute of Management, Ahmedabad, is prepared as a basis for class
discussion. Cases are not designed to present illustrations of either correct or incorrect handling of
administrative problems.
2002 by the Indian Institute of Management, Ahmedabad.

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IIMA/PSG0084

with the Northern (Coimbatore-Salem) segment of the same NH, was not viable on its own,
the state government agreed to enlarge the scope of the project. It included the construction
of an additional bridge (to make the two lane into a four lane right of way) near the old
Athupalam Bridge, across the Noyyal river. The ROB on NH 209 was not considered.
Subsequently, a tripartite concession agreement was signed between MoST, Tamil Nadu
State Government and LTTIL on 13 October 1997.
Project Scope
The scope of the project thus included two distinct components, (i) construction of the
bypass, and (ii) construction of a two lane Athupalam Bridge across the Noyyal river on NH
47. (A key map indicating the location of the Coimbatore Bypass and its adjoining road
network is shown in exhibit 1). This project was the first to be executed on a BOT basis in the
state.
(i) Coimbatore Bypass: Construction of the bypass for a length of 27.67 km, having a
two lane 7.5 m carriageway with paved shoulders configuration. The alignment of
the bypass intersected two major roads which had since been notified as national
highways, namely, the Coimbatore Pollachi Road (NH 209) and the Coimbatore
Karur Road (NH 54A). The bypass component included the construction of two
ROBs, one major bridge (across the river Noyyal, called Noyyal Bridge), 10 minor
bridges and other cross drainage structures.
(ii) Athupalam Bridge: Construction of two additional lanes to the existing bridge
over the river Noyyal on NH 47 at km 161/8* was proposed as part of the bypass
project to ease congestion on the existing bridge.
The cost of the project was estimated at ` 90 crores (87 crores for the Coimbatore Bypass and
3 crores for the Athupalam Bridge), the recovery of which was proposed through collection
of tolls on both the bypass and the bridge.
As per the agreement, LTTIL was given a concession to levy toll for a period of 20 years on
the Athupalam Bridge and 30 years on the Coimbatore Bypass. The agreement clearly
specified that while the traffic risk was with LTTIL, the risk due to non-payment of tolls
would be with the state government. The toll rates as agreed in the concession agreement
are presented in exhibit 2.
Project Execution and its Impact
The work on the project commenced in December 1997. The Athupalam Bridge was
completed first and opened to traffic on 12 December 1998.
From the very first day of commissioning and opening the traffic at the Athupalam Bridge,
the Bus Owners Association (BOA) and the public had been protesting against the toll
collection. The Collector convened a series of meetings with various Associations between 13
and 19 December 1998, on this issue. According to him,The bridge users were agitated
about the collection of toll fee for each trip and refused to pay, resulting in frequent
blockades and crowding near the toll plaza. The users felt that due to the construction of this
new bridge, unnecessary financial burden was being put on them. Various organizations
had proposed to go on strike, opposing the collection of the toll fee on the bridge. He
requested the state government for complete waiver of toll fee at the Athupalam Bridge.

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LTTIL made several representations to the state government in an attempt to resolve the
issue. The State Transport Corporations (STCs), together with private buses, local trucks and
taxi operators who made multiple trips on the bridge, expressed their unwillingness to pay
the toll for every trip.
The Minister for Highways and Ports convened a meeting with the Minister of Forest and
Environment, the Collector, LTTIL and various Association representatives on 4 January
1999. In the meeting, he proposed the following suggestions:
(i)

Introduction of concessional toll rate of ` 50 per day for unlimited trips for
government and private buses
(ii) Reduction in monthly tariff rate from ` 325 to ` 300 for all non commercial
vehicles, and
(iii) Full exemption for government vehicles, mortuary vans and convoys.
(iv) A recommendation to be made to the GOI, requesting compensation for the
losses incurred due to the above concession.
LTTIL accepted suggestion (i) above, but restricted it to the STCs with the condition that the
GOI should compensate the financial loss. LTTIL insisted on retaining the toll per trip as
agreed in the concessional agreement for the private buses, local trucks and taxi operators.
The Tamil Nadu and Kerala STCs started paying concessional tolls, whereas the BOA
refused to pay the toll amount. The BOA filed a writ petition on 31 March 1999 in the
Chennai High Court challenging the collection of toll at the Athupalam Bridge. The High
Court dismissed the petition on 21 September 1999 and passed an interim order that the
BOA must pay the tolls as per the concession. (Appendix 1 provides a detailed summary).
The Secretary held a meeting on 22 July 1999 with the Collector and various associations of
road users. In spite of an appeal by the Secretary and the Collector, the Associations stuck to
their demand. A situation arose where it was found that forceful collection of toll might lead
to serious law and order problems.
The Coimbatore National Highways Wing conducted a one week traffic survey of the
Athupalam Bridge from 19-25 November 1999. The survey gave the profile of the usage of
the bridge by examining the number of trips made per day by different types of vehicles
(exhibit 3). As can be seen, buses were the largest high frequency users of the bridge. About
one per cent of car/jeeps/vans (CJVs), about 20 per cent of buses and less than one per cent
of trucks made four or more trips per day.
LTTIL expressed its inability to enforce toll collection and requested the state government to
provide police support. In response to the request, the state police force was deployed on
cost basis from 30 December 1999. But even this did not bring any major improvement in the
compliance.
The bypass was opened to traffic in January 2000. The actual total cost on completion of the
project was ` 110 crores, of which ` 42 crores was funded by LTTIL as equity and ` 68 crores
by institutional financiers as debt. The cost was more than what was planned for, due to (i)
interest during construction due to delays, (ii) the introduction of an additional road over
bridge in the bypass segment, and (iii) additional works on either side of the bridge,
including the construction of a control room.

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IIMA/PSG0084

The matter of toll collection at the Athupalam Bridge was viewed seriously by the GOI. The
Union Minister of Surface Transport wrote to the Chief Minister, Tamil Nadu, to intervene
in the matter. In a letter dated 28 April 2000, the Chief Minister assured smooth collection of
toll on the bridge. The state government had been periodically addressing the Collector to
personally monitor and ensure smooth collection of the toll. After the posting of police
personnel, the situation had improved slightly, but not completely. The private buses and
trucks continued not to pay toll.
The BOA filed a review petition in the Chennai High Court immediately after the dismissal
of the previous writ petition. The Court dismissed the petition on 16 June 2000. BOA
disregarded the Courts order and refused to pay the tolls.
As of July 2000, LTTIL reported a loss of ` 8.5 crores due to unrecovered toll. This was
claimed as compensation from the state government. LTTIL had data about toll collection on
the number of trips made by different classes of vehicles at Athupalam Bridge from
December 1998 to July 2000. On the basis of this information, comparative projections were
made on the revenue that could have been realized if (i) the tolls were paid strictly according
to the agreement, (ii) the amount was collected at a concessional toll rate of ` 50 per day for
unlimited trips for government and private buses, and (iii) all the suggestions of the
Minister of Highways and Ports were implemented.
Accordingly, the traffic calculations pointed out that if the Ministers suggestion had been
accepted and implemented, the real collections could have been much more than what was
actually collected during the period. This was because the willingness to pay would have
been higher if the toll rates were capped for high frequency users. The analysis showed that
LTTIL could have collected ` 11.0 crores according to the Ministers suggestion (Exhibit 4).
However, LTTIL could collect only ` 2.9 crores.
The state government commented that,The loss claimed by LTTIL was a result of the
companys inflexible attitude. The state government could not be held responsible for it. It
pointed out that, If the suggestion of the Minister was accepted, the loss could have been
limited to ` 33.4 lakhs. This amount could be easily compensated by cash or a slight increase
in the concession period.
Given the response of the state government, LTTIL notified the central government for
invoking the provisions of the concession agreement. Considering this, the Secretary, MoST,
wrote to the Secretary, Highways, Government of Tamil Nadu, on 31 August 2000, drawing
attention towards the obligatory requirements of the state government, being a signatory to
the tripartite agreement. The Secretary asked the Collector to take effective steps for the
enforcement of the smooth collection of tolls at the Athupalam Bridge.
The Secretary held discussions with the Collector, the National Highways officials and the
LTTIL representatives on 18 September 2000. It was noted that based on the toll payment
statistics as of 13 September 2000, (i) the state government buses were making the toll
payment (` 50 per day), and (ii) 38 per cent of trucks, 40 per cent of CJVs, 23 per cent of light
commercial vehicles (LCVs) and 13 per cent of private buses were making the payment on a
per-trip basis.
The government officials stated that,Sufficient efforts were not forthcoming from LTTIL
staff posted at the toll plaza to demand toll from road users. They appeared totally
demotivated and simply allowed the users unwilling to pay the toll to pass through the free

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5 of 11

IIMA/PSG0084

lane. There were long queues at the toll plaza during peak hours which was against the
relevant clause in the concession agreement. The LTTIL representatives said that,The
police personnel were not present in full strength as sanctioned by the state government.
Only two to three police constables remained present. Until September 2000, over ` 36
lakhs had been spent by LTTIL for the police and private security at the toll plaza.
The Secretary suggested the following:
(i)

The concession offered to Tamil Nadu and Kerala State Government buses may
also be extended to the private buses/trucks. The private BOA have agreed to
pay concessional toll of ` 50 per day. If this is implemented, the Collector will be
in a position to persuade the trucks to pay the toll fee at the concessional rates.
(ii) The buses and trucks with single/double trips and the LCVs/multi-axle vehicles
(MAVs) can be easily forced to pay tolls as per the rates notified.
(iii) Without offering any concession to the private buses and trucks, it would be
difficult to enforce smooth collection at the bridge. The issue has been over
politicized by vested interested groups.
(iv) The concessional system of toll collection may be followed till 31 March 2001 and
thereafter tolls may be gradually increased to reach the level indicated in the
agreement in phases.
(v) The actual loss of revenue on account of this concession may be compensated to
LTTIL, if found necessary.
Current Situation
The Athupalam Bridge users were still protesting against the payment of tolls, though the
traffic density at the bridge was increasing. The daily toll collection of the bridge came down
from 110,000 per day during December 1998 to ` 40,000 per day in September 1999. On an
average, it hovered at around ` 70,000 to 75,000 per day as against the projected revenue of `
1.8 lakhs to ` 2.0 lakhs per day.
The compliance of the toll collection on the bypass road was reported to be satisfactory. The
number of vehicles using the bypass road daily was about 3,500. The collection at the bypass
road was about ` 84,000 per day, which was 70 per cent of the estimated ` 1.2 lakhs per day
(based on LTTILs own studies prior to the project).
According to the original revenue projections, 60 per cent of the revenue was to come from
collection of toll at the Athupalam Bridge and the balance 40 per cent from users of the
bypass.
The losses of LTTIL kept on creeping up, adding to the worries of Mr. Ramachandran.
About 230 buses made a minimum of 2,180 trips a day. The company claimed it would
sustain a loss of ` 20,000 per day on government buses alone. The financial institutions were
putting pressure on LTTIL for creating additional securities. The interest payment worked
out to ` 9 crores per year.
With such a financial position, it was clear that unless the company was given powers by the
government to take stringent action against the non payers, it would be impossible for the
company to recover its investment on the project. Even the proposal to extend the project
concession period to make up for the loss in collection would not be beneficial to the
company because of the discounted value of money.

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IIMA/PSG0084

Mr Ramachandran felt that if the situation did not improve, the company would be forced to
request the state government to take over the project by invoking the force majeure clause.
He was also wondering why the central and state governments were not more proactive in
resolving the issue, especially since (as media had already started reporting) the handling of
this project was expected to have an adverse impact on the other three BOT road bridge
projects in the state that were in the pipeline.
Exhibit 1
Map Indicating the Location of Coimbatore Bypass Project
To Cudalur
To Ooty

To Satyamangalam

To Salem

To Erode
ROB
Noyyal River

NH 47

New Noyyal Bridge

NH 54-A
To Trichy

Athupalam
Bridge

Proposed
Coimbatore
Bypass

NH 47
NH 209

ROB

To Pollachi
To Palghat
To Pollachi
To Palghat

National Highway
Proposed Bypass
Canal
Railway Line

Source: Company Data and Authors Drawing

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IIMA/PSG0084
Exhibit 2
Toll Rates as per the Concession Agreement

Category of Vehicle
Car/Jeep/Vans (CJVs)
Light Commercial
Vehicles (LCVs)
Buses
Trucks
Multi-axle Vehicles
(MAVs)/Other Heavy
Construction Equipment

Toll on Athupalam
Bridge (for old and new)
(`/trip)
5
15

Toll on bypass
for part use
(`/trip)
7
10

Toll on bypass
for full use
(`/trip)

15
15
23

20
20
30

56
56
84

19
28

Auto rickshaws, two wheelers and slow moving vehicles are exempt from paying tolls.

Source: Government of Tamil Nadu

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IIMA/PSG0084

8 of 11
Exhibit 3
Profile of Usage of Athupalam Bridge by Different Types of Vehicles up to July 2000

No
of
Trips

CJVs
% of
Trips

1
2
3
4
and
more
Total

Total
No of
Vehicles
3323.0
328.8
26.1
8.5

% of
Vehicles
Unpaid
85.8
11.8
1.6
0.8

% of
Trips

81.1
16.1
1.9
0.9

Total
No of
Trips
3323.0
657.6
78.3
38.5

100.0

4097.4

3686.4

100.0

No of
Trips

1
2
3
4
and
more
Total

Total
No of
Vehicles
1028.0
79.9
7.3
1.9

% of
Vehicles
Unpaid
88.2
9.9
1.3
0.6

% of
Trips

Total No
of Trips

84.4
13.1
1.8
0.7

Total
No of
Trips
1028.0
159.7
21.8
8.7

65.6
10.4
4.7
19.3

100.0

1218.2

1117.1

100.0

100.0

Trucks
% of
Trips

(Trips and Vehicles in 000s)

Buses

LCVs

1403.8
222.0
99.5
413.6

Total
No of
Vehicles
1403.8
111.0
33.2
61.1

% of
Vehicles
Unpaid
64.9
10.2
4.8
20.1

2138.9

1609.1

100.0

% of
Vehicles
Unpaid
87.9
8.8
2.6
0.7
100.0

MAVs

Total
No of
Vehicles
2418.9
94.6
7.4
4.0

% of
Vehicles
Unpaid
91.9
6.6
0.9
0.6

% of
Trips

91.27
7.14
0.84
0.75

Total
No of
Trips
2418.9
189.2
22.3
19.9

100.0

2650.3

2524.9

100.0

Total

Total
No of
Vehicles
118.8
0.7
-

% of
Vehicles
Unpaid
98.2
1.8
-

% of
Trips

Total No
of Trips

98.9
1.1
-

Total
No of
Trips
118.8
1.3
-

81.1
12.0
2.2
4.7

8292.5
1229.8
221.9
480.7

Total
No of
Vehicles
8292.5
615.0
74.0
75.5

100.0

120.2

119.5

100.0

100.0

10225.0

9057.0

Source: (i) Actual data (Total no of trips and vehicles) from Toll Plaza from December 1998 to July 2000
(ii) Information regarding % of vehicles unpaid from the one week survey between 19 to 25 November 1999 by Coimbatore NH Wing

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IIMA/PSG0084
Exhibit 4
Analysis of Toll Collections at Athupalam Bridge
from December 1998 to July 2000
(` 000s)

Sl No

1
2
3
4
5

Type of
vehicle
CJVs
LCVs
Buses
Trucks
MAVs
Total
Loss

Amount
collectable
as per
1
agreement
20,486.87
18,272.99
32,083.52
39,753.86
2,763.79
113,361.02

Amount
collectable on
vehicle basis
(irrespective of no
2
of trips made)
18,432.16
16,757.04
24,136.58
37,873.97
2,748.45
99,948.20
(13,412.82)

Amount collectable if
concessional toll
was accepted (as per
the Ministers
3
suggestions)
20,422.71
18,240.50
28,937.71
39,656.07
2,763.79
110,020.78
(3,340.24)

Number of trips multiplied by respective toll rates

Number of vehicles per day multiplied by respective toll rates

Actual
amount
collected
by LTTIL
9574.81
4089.18
1482.01
11589.10
1836.04
28,571.14
(84,789.88)

For vehicles upto three trips per day: Number of trips multiplied by respective toll rates.
For vehicles doing four or more trips per day: Number of vehicles multiplied by ` 15 for CJVs and `
50 for the other vehicles

Source: A Note on Toll Collection in Coimbatore Athupalam Bridge, Government of Tamil Nadu, September 2000

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IIMA/PSG0084
Appendix 1
Position Note Regarding Toll Collection at Athupalam Bridge in Coimbatore

The work of construction of a bypass for a length of 27.67 kms at Coimbatore in NH47 was awarded
to M/s L&T Transportation Infrastructure Limited (LTTIL) by the Ministry of Surface Transport (MoST),
Government of India (GOI), under BOT system. In order to have the project viable, an additional work
of construction of a major bridge at km 161/2 of NH 47 across Noyyal River (Athupalam Bridge) in
Coimbatore was also included along with this project. The total estimated cost of the project was Rs
90 crores. This was the first BOT project in the state of Tamil Nadu.
rd

A tripartite agreement was signed by the GOI, Government of Tamil Nadu and the firm, LTTIL on 3
rd
October 1997 and the work was started on 3 December 1997. The firm had been authorized to
collect fees from the users of Athupalam Bridge as detailed below.
Sr
No
1
2
3
4
5

Category of Vehicle
Car/Jeep/Vans (CJVs)
Light Commercial Vehicles (LCVs)
Buses
Trucks
Multi-axle Vehicles (MAVs)/Other Heavy
Construction Equipment

Fee Rate in ` Per

Vehicle Per Trip
5
15
15
15
23

The Athupalam Bridge work was completed and the same was inaugurated by the Minister for
th
Highways on 12 December 1998 and LTTIL started to collect the toll from this date itself.
Right from the date of commissioning and opening the traffic in the Athupalam Bridge, the Bus
Owners Association (BOA) had been putting up a rigid protest against the toll collection and refused
to pay toll till date.
Due to financial constraints in the Transport Corporation, the Tamil Nadu STC buses had requested
for concession tariff to use the Athupalam Bridge. This was considered and Tamil Nadu STC buses
were allowed to make a concession rate of Rs 50 per bus per day instead of Rs 15 per trip per bus.
Subsequently the Tamil Nadu STC buses and Kerala STC buses were paying at a concession rate of
Rs 50 per bus per day. But the Lorry Owners and BOA refused to pay the toll fee at Athupalam.
The Coimbatore District BOA (South) had filed a writ petition in the High Court of Judicature at
st
Chennai (WMP 7960/99 in WP 5459 of 1999) dated 31 March 1999.
The High Court dismissed the miscellaneous petition no 7960/99 rejecting the prayer for the stay
st
against the collection of toll fee in Athupalam Bridge and passed an interim order on 21 September
1999 to pay toll fee as per agreement taking into account of LTTIL undertaking. (LTTIL should keep
an account of vehicles of BOA which paid the toll fee and should refund the amount paid, if the
judgement was pronounced against the entrepreneur).
th

On 20 September 1999, a meeting was conducted with the representatives of all associations by the
Secretary Highways, Government of Tamil Nadu, Chennai, Superintending Engineer, MoST, New
Delhi, Collector, Coimbatore District, Chief Engineer, National Highways, Chennai, and
Superintending Engineer, National Highways, Salem-4.
During the discussion, the Secretary requested the Bus and Lorry Owners Association to accept the
concession rate of Rs 50 per bus per day. But, the President, BOA, requested the Collector to fix the
amount reasonable (ie Rs 15 per bus per day) for the local buses. Quite contrary to this, it was said in
the review petition filed by the BOA that they have accepted to pay Rs 50 per bus per day which was
not correct.
th

The LTTIL had stated in their letter dated 27 September 1999 that they should obey the Court order
st
th
issued on 21 September 1999. Again in another letter by LTTIL dated 4 October 1999, the LTTIL
th
informed the BOA citing their letter dated 27 September 1999 and requested them to obey the court

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IIMA/PSG0084

order and pay the toll fee as per notification stipulated in the agreement. The BOA had represented to
th
the LTTIL in their letter dated 5 October 1999 that they were agreeable to pay Rs 50 per bus per day
but not heeded to the same.
th

On 6 October 1999, the LTTIL had informed the BOA giving a list of BOA buses which refused to
pay toll even after the court order.
The BOA again filed a review petition in view of the dismissal of the writ petition praying the High
Court to modify the orders and to impose a stay against collections of toll fee.
LTTIL had addressed the BOA to cooperate and to pay toll fee as per court direction. LTTIL had filed
a petition in November 1999 seeking direction of the court to direct the BOA to obey the court order.
nd
High Court had passed an order on this petition on 22 March 2000 directing the Coimbatore District
BOA to obey the court order and to pay the toll fee at Athupalam.
In spite of their request to inform the vehicle numbers of Association members for keeping an account
th
as per court order, the BOA had given the numbers only on 12 April 2000. But they had not
instructed their Association people to pay the toll fee at Toll Plaza (as ascertained from the LTTIL).
The BOA again filed a review petition in March 2000 before the High Court in view of the dismissal of
th
the miscellaneous petition. The review petition had also been dismissed on 16 June 2000. Again the
LTTIL had addressed the BOA pointing out the dismissal of their review petition and requesting them
to pay the toll fee as per court direction. But the BOA did not heed and refused to pay the toll fee till
date.
To get a better result, the Home Ministry had also issued a government order to provide police
assistance on cost basis to LTTIL. It is brought to the notice that the attempts of LTTIL with police for
assistance in collections of toll fee still continues. It is ascertained from the LTTIL that the loss of
revenue till September 2000 is Rs 847.9 lakhs.

Chief Engineer
National Highways

Source: Excerpted and modified from A Position Note Regarding Toll Collection at Athupalam Bridge in
Coimbatore, Government of Tamil Nadu, October 2000.

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