FAST TRACK CONSTRUCTION:

Firstly BOLT was tried in 1997. Later on it decided to go for BOT scheme in 200001. Work started in 2002: approx. 2 years. Completed on 2004. Good achievement but the time taken was too much. BOT schemes are good for a new project.

QUALITY OF CONSTRUCTION:
Lower construction costs, reduced life cycle maintenance costs & lower costs of associated risks: PPPs. Long term operation & maintenance responsibilities to the private sector: in traditional contracting. Reduces the risk of future fluctuations in operation costs. In this case not much benefits could be drawn, only final quality of project was better due to high cost.

NATURE OF FUNDING:
Estimated cost was Rs 70 crores in 2001. Debt equity ratio: 2.75 & Rs 50 cr. from long term bank & rest from promoters equity. Various bids were invited & the lowest bid of Rs 7.96 cr. with IRR of 16.27% was awarded the project. Due to inflation risk & additional liability the cost incurred upto Rs 92 cr. with IRR upto 12% only. 12% IRR considered good return to SPC & it is not a very high cost for railways.

IMPLICATIONS:
OPERATIONAL Deputy Chief Engineer of engineering dept. was nodal officer to interact the project. Various disputes & conflicts took place such as: Delay in finalysing yard plans & its signal interlocking pans. Delay in traffic blocks for movement of material & alterations in yards. Delay in materials like rails, sleepers, switches, etc from RDSO.

CONTRACTUAL
It was specified that track would be made for 100 KMPH to the satisfaction of CRS & make up of earthwork also. The concessionaire was interested only in short term objectives. The main objective was to address the specifying the quantity of work & quality of materials to be used. Through this the possibility of SPC going low quality work can be avoided.

LEGAL
The legal dispute occurs because of different interpretations by concessionaire & the dept. According to concessionaire, concession period starts from appointed date i.e. date of finance close & access charge become payable from the date of COD. Finally point of concessionaire has been accepted.

Risk Management
1. Demand Risk Railway operation has the monopoly of railways This project is a broken link and having other alternative 2 Construction Risk-

Performance guarantee deposit Rs 5 crore Completion period was linked with bonus and penalty clauses 3 Supply Risk Monopoly of railway Inspection of RDSO (Railway Design Standards Organization) is mandatory before using material Lack of supplier

Risk cont..
4 Human Resource Risk

Lack of availability of trained manpower. 5 Design Risk Negligence in the design work Principal agent conflict Complex nature of work 6 Project Management Risk-

Detailed sequencing of project was done Mile stones were made

Contd
7 Inflation Risk Major items had inflated between the date of RFP and to real execution For example- Rail, Ballast, Sleeper had inflated from 31000/MT to 35458/ MT 8 Maintenance Risk Requirement to maintain a level of standard for design and standard work Warranty of 12 month 9 Regulation Risk Risk is shared between Railways and concessionaire as per clause

Contd
10 Risk of obtaining clearances from other agencies Railways has taken the responsibility of getting clearances from other agencies to protect the concessionaire. 11 Future cash flow risk-

Risk of default in getting annuity from the Railways

12 Land acquisition Risk-

Land acquisition was the responsibility of Railways

13 Force majeure risk Risk of politician and non politician