Vadodara-Halol Toll Road (VHTR)

Group-4
Aswathi(06), Baiju(08), Karan(24), Ravi(34), Sanyam(35)
 Project Description

• One of the first State Highway widening projects developed on a PPP basis.

• Widening and strengthening (32 km) of existing 2-lane SH 87 into a 4-lane tolled expressway

• Commissioned IL&FS to jointly develop two road projects in the State (Vadodara-Halol and
Ahmedabad-Mahesana).
• SPV: Vadodara Halol Toll Road Company Limited (VHTRL)

• VHTRL appointed a contractor, through international

competitive bidding, for the construction, operation
and maintenance of the project.

• VHTRL manages, operates

and maintains the road for
30 years starting from 2000.
 PPP structure of the project

• Built, Own, Operate and Transfer (BOOT)

• Consortium of Punj Lloyd Limited and IRCON International Limited appointed as contractors to
construct, operate and maintain the project.

• Contractors also have an equity stake in VHTRL

• VHTRL has a right to charge toll directly to the users and is permitted to earn from
advertisements, hoardings and other commercial activities at the project site.

• If unable to recover the total cost, including a 20% return, the concession period shall be
extended for a period of 2 years at a time. Scope of the
Project
• GoG may also grant certain development rights

• Land: leased to VHTRL by GoG

Management,
Construction Operation and
Maintenance
 Risk Allocation Framework

Risk Type Sensitivity Risk Period Primary Risk Bearer

Delays in land acquisition High Government
Delays in obtaining permits High Private operator
Design risk High Private operator
(transferred to
contractor)
Inflation risk Medium Private operator
(transferred to
contractor)
Revenue/ Demand Risk Low Private Developer /
Government
Construction Risk High 0-1 years Private Developer
and 6 (transferred to
months contractor)
 Risk Allocation Framework

Risk Type Sensitivity Risk Period Primary Risk Bearer

Financial Risk High Private operator
Force Majeure Low Private operator
Political Risk Low Government
 Financing Information

• Project cost: ₹ 161 crores

• Construction cost: ₹ 119 crores

• Equity: ₹ 67.9 crores (GoG, IL&FS, American Insurance Group, and the consortium of

contractors)

• Debt: ₹ 93.2 crores (raised by IL&FS through various Indian financial institutions including

Industrial Development Bank of India, Infrastructure Development and Finance

Corporation (IDFC), State Bank of India, and other lenders)

• Credit enhancement: IL&FS (to the extent of ₹10 crore) and IDFC (to the extent of ₹ 20

crore)- Deep Discount Bonds issued by VHTRL

Financing Structure
 Process analysis

Inception
• GoG wanted to upgrade the Vadodara to Halol section.
• Need felt for improving efficiencies and attracting private
capital for infrastructure development to free up government
resources.
• GoG signed MoA with IL&FS to develop the strech on BOOT
basis.
 Feasibility

• Consultancy firm was selected for technical-economical

feasibility study.
• GoG approved widening and strengthening of the two lane road
to four lane with provision of service road.
• Investment recovery was recommended in term of tool
collection.
 Procurement

• Executive right and authority to VHTRL

• To develop, design, engineer, finance, procure and construct the
project.
• After completion of the project to manage, operate and
maintain and regulate the use as third party.
• To demand, collect, retain and appropriate toll to recover the
total cost of the project.
• to enter into private contracts with the users
• To appoint sub contractors.
• Financial criterion was the lowest price, the lowest price was the NPV
calculated on the estimates of
– Fixed price of construction
– Interest during construction
– Cost during the concession period on routine maintance, periodic maintance,
tool systems and tool augmentation.

• VHTRL entered into contract with Punj Lloyd ltd. And ICRON
international Ltd. For O&M.
 Development

• Development of 31.7 Km. stretch was achieved in single phase.

• Completion of the project was 4 months ahead of the schedule.

• Key feature of the project was the “Environmental and Social Impact
Assessment” and Mitigation Plans.

• VHTRL undertook reallocation of temples, schools and environmental

infrastructure and implemented its environmental and social management.

• It created additional facilities such as pedestrian subways and compound

wall and provided additional houses for reallocation of communities.
 Delivery

• The project started in March 1999 and was completed by

September 2000
• Provisions of 5 major items of O&M during project:
– Routine Maintance (Continuous)
– Periodic Overlay (Every 5 years)
– Periodic Renewal (every 15 years)
– Toll O&M (Once a year)
• Toll rates are fixed and allowed to increase on annual basis on
escalation formula linked to CPI.
• Performance standards were O&M are specifies in the agreement.
• As per the proposed scheme VHTRL & AMTRL were merged into
single entity.
• GRICL had restructured all the debt obligations.
 Exit

• Concession period to end in 2030.

• If the developer is unable to recover project cost as per the
concession agreement extension of 2 years is allowed.
• The concession period will keep extending by 2 years till the
concessionaire will be able to gain 20% return on investment.
 Key Learning's and
observations

• Pre Development market assessment is critical

– Pre-development preparation must be robust as it can impact the long term
objective of the project.
• Competitive bidding can ensure a “better deal”.
– It brings out the private sector capability and helps govt. to get financial
terms
• Need to create balance risk return profile:
• Conflicts of interests should be identified and avoided quickly:
– Must be identified in the development process to ensure transparency and
the integrity of the transaction.
• Innovating Financial mechanism:
• Environmentally and socially responsive development framework:
– Must be included in the contractual framework that creates a benchmark
and adds immense demonstration value.
 Current Status

• Operational since 2000

• Traffic lower than expected
• Assumed that incentives for industrial development available in
Halol area were to continue over the long term- but were
eventually withdrawn.
• Financial condition started deteriorating
• Corporate debt restructuring in 2004
• AMTR and VHTR merged into a single entity
ThAnK yOu !