nhai report part 1 opt

Guidelines for Investment in Road Sector

Government of India Ministry of Road Transport and Highways

Not just roads... building a NATION

14. Subject to change in Budget proposals for 2009-10

Index

Executive Summary 4

Current Scenario 5

Financing National Highway Projects 7

Public Private Partnership in Highway Development 10

Revenue Risks and Mitigation 25

Overview of Successful Projects 28

Work Plan-II (2010-11) 30

Policy Framework 34

Foreign Direct Investment Policy 36

Tax Environment 38

Repatriation of Investments and Profits Earned in India 44

Administrative Framework 46

About NHAI 48

Annexure 50

for National Highways Authority of India

KPMG in India

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provided accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Executive Summary

The National Highway network of the country spans

about 66,590 km.The National Highway Development

Project (NHDP), covering a length of about 55,000 km

of highways, is India's largest road development

programme in its history. In many ways, this ambitious

and path-breaking initiative of the Government of

India, which began in the last decade acknowledged

the importance of private sector in India's

infrastructure development.

The consistent policy and institutional framework,

which has been the backbone of the INR 3,00,000 1Crore (USD 60 billion ) NHDP, also conveys the intent

and commitment of successive governments to

encourage increased private sector participation in

developing the arterial road network of the country to

world class standards. More than 60 percent of the

estimated investment requirement is expected to be

privately financed.

The early success of Public-Private-Partnerships (PPP)

in the NHDP, arguably, set the tone for similar

initiatives in other infrastructure sectors and has

provided the single largest opportunity for private

financing and management of infrastructure services.

Build Operate Transfer (BOT) concession contracts

with an estimated value of USD 9.2 billion (including 2BOT/DBFOT -Toll and BOT-Annuity contracts) have

been awarded under various packages till date and

these projects are expected to be fully operational by

2015-16.

With several key projects on the anvil (including 6-

laning of 4-laned roads, expressways and port

connectivity projects) and the increasing interest

evinced by domestic and foreign players in the sector,

NHAI is happy to present to you, the Guidelines for

Investment in the Road Sector, with specific focus on

NHDP.

NHAI believes that this document would serve as a

useful guide for potential investors, developers and

stakeholders interested in participating in India's

ambitious highway development programme.

Guidelines for Investment in Road Sector4

1. INR 50 = 1 USD : figures approximated2. Design Build Finance Operate & Transfer (DBFOT)


Current Scenario

Guidelines for Investment in Road Sector 5

India has an extensive road network of 3.3 million km –

the second largest in the world. The National

Highways have a total length of 70,548 km and serve

as the arterial road network of the country. It is

estimated that more than 70 per cent of freight and 85

per cent of passenger traffic in the country is being

handled by roads. While Highways/ Expressways

constitute only about 2 per cent of the length of all

roads, they carry about 40 per cent of the road traffic

leading to a strain on their capacity. The number of

vehicles on roads has been growing at compounded

annual growth rate (CAGR) of over 8% in the last 5

years (2003-04 to 2008-09).

The development of National Highways is the

responsibility of the Government of India. The

Government of India has launched major initiatives to

upgrade and strengthen National Highways through

various phases of the NHDP. NHDP is one of the

largest road development programmes to be

undertaken by a single authority in the world and

involves widening, upgrading and rehabilitation of

about 55,000 km, entailing an estimated investment

of INR 3,00,000 Crore (USD 60 billion).

The National Highways Authority of India (NHAI) is

mandated to implement the National Highways

Development Project (NHDP). Most of the projects

have been developed or are under development on

Public Private Partnership (PPP) basis through Build

Operate and Transfer (BOT)-Annuity and BOT-Toll

mode (these have been explained in detail in later

section of the brochure). Typically, in an annuity

project, the project IRR is expected to be 12-14% and

equity IRR would be 14 -16%. For toll projects, where

the concessionaire assumes the traffic risk, the

project IRR is expected to be around 14-16% and 3equity IRR around 18-20% .

The NHDP is being implemented under several

phases:

4-laning of the Golden Quadrilateral (GQ) and North-

South and East- West (NS-EW) Corridors-(NHDP I & II)

Phase I mainly involves widening (to 4 lanes) and

upgrading of 7,498 km of the national highway

network and has four component packages:

1. Highway network linking the four metropolitan

cities in India i.e. Delhi-Mumbai-Chennai-Kolkata,

covering a length of 5,846 km, popularly known

as the Golden Quadrilateral (GQ) project.

2. Highways along the North-South (NS) and East-

West (EW) corridors, covering a length of 981 km

3. Port connectivity projects covering a length of

356 km; and

4. Other highway projects, covering a length of 315

km

Phase-II involves widening and improvement of the

NS-EW corridors (not covered under Phase-I) covering

a distance of 6,647 km, besides providing connectivity

to major ports on the east and west coasts of India and

some other projects. This includes 6,161 km of NS-EW

corridors and 486 km of other highways. The total

length of the NS-EW network under Phases I & II is

about 7,200 km.

4-laning of the GQ has almost been completed. Phase

II is expected to be largely completed by December

2010.

3. CRISIL Research


4Current Status of NHDP


Upgradation of 12,109 km (NHDP-III)

2-laning of 20,000 km with paved shoulders (NHDP-IV)

6-laning of 6,500 km (NHDP-V)

NHDP-III involves upgradation of 12,109 km (mainly 4-

laning) of high density national highways, through the

Build, Operate & Transfer (BOT) mode at a cost of INR

80,626 Crore (USD billion).

The project consists of stretches of National

Highways carrying high volume of traffic, connecting

state capitals with the NHDP network under Phases I

and II and providing connectivity to places of

economic, commercial and tourist importance.

With a view to providing balanced and equitable

distribution of the improved/widened highways

network throughout the country, NHDP-IV envisages

upgrading of 20,000 km of such highways into 2-lane

highways, at an indicative cost of INR 27,800 Crore

(USD 5.6 billion). This will ensure that their capacity,

speed and safety match minimum benchmarks for

national highways. The government has already

approved strengthening of 5,000 km to 2-lane paved

shoulders on BOT (Toll/ Annuity) under NHDP-IV A at a

cost of INR 6,950 Crore (USD 1.4 billion).

Under NHDP-V, 6-laning of the 4-lane highways

comprising the GQ and certain other high density

stretches, will be implemented on BOT basis at an

estimated cost of INR 41,210 Crore (USD 8.2 billion).

These corridors have been 4-laned as part of the GQ in

Phase-I of NHDP. Implementation of initial set of

projects has already commenced and the entire

16.1

package is expected to be completed by 2012. Of the

6,500 km proposed under NHDP-V, about 5,700 km

would be taken up in the GQ and the balance 800 km

would be selected on the basis of predefined eligibility

criteria.

With the growing importance of urban centres of

India, particularly those located within a few hundred

kilometers of each other, expressways would be both

viable and beneficial. The Government has approved

1,000 km of expressways to be developed on a BOT

basis, at an indicative cost of INR 16,680 Crore (USD

3.3 billion). These expressways would be constructed

on new alignments.

The development of ring roads, bypasses, grade

separators and service roads are considered

necessary for full utilisation of highway capacity as

well as for enhanced safety and efficiency. For this, a

programme for development of such features at an

indicative cost of INR 16,680 Crore has been approved

by the Government. Apart from the high density

corridors, a substantial part of the National Highways

network would also require development during the

11th Plan period. These sections are characterised by

low density of traffic. Some of these stretches fall in

backward and inaccessible areas and others are of

strategic importance. The development of these

categories of National Highways would be carried out

primarily through budgetary resources.

Development of 1,000 km of expressways (NHDP-VI)

Other Highway Projects of 700 km (NHDP-VII)

st4. As on 31 March, 2009.

40000

35000

30000

25000

20000

15000

10000

5000

0

Completed Work in Progress To be Awarded Total

13731

6862

13055

33642

Financing National Highway Projects

Traditionally, financing for development of National

Highways in India was from the budgetary resources

of the Government of India. In order to augment the

available resources, loans have also been raised from

multilateral agencies like World Bank, Asian

Development Bank (ADB) and Japan Bank of

International Cooperation (JBIC).

NHAI has earlier received loans directly from

multilateral agencies (highway project). These loans

are expected to be repaid through the toll income from

the project. The interest rate for the project is

determined according to ADB's pool based variable

lending rate system for US dollar loans. Around 80 per

cent of the external assistance is provided to NHAI as

a grant by the Central government. The balance is

made available as long-term loans to NHAI, with the

Centre bearing the foreign exchange risk. Such loans

are usually provided for 15-25 years with a moratorium

of 5 years.


Summary of Externally Aided Projects

World Bank Funded Projects

NHDP Phase I

GQ

Others

NHDP Phase II EW Corridors

Sub-Total A

ADB Funded Projects

NHDP Phase I

GQ

Others

Sub-Total B

JBIC Funded Projects

NHDP Phase I

GQ

Others

Sub-Total C

Grand Total (A+B+C)

18

18

-

12

30

13

12

1

31

44

7

5

2

7

81

983

983

-

482

1465

766

718

48

1636

2402

150

111

39

150

4017

5538

5538

-

3208

8746

2436

2377

59

7565

10001

634

333

301

634

19381

12

12

-

-

12

10

9

1

5

15

7

5

2

7

34

616

616

-

-

616

616

568

48

365

981

150

111

39

150

1747

NHDP Phase II NS & EW Corridors

Category Awarded Awarded

Cost (INR Crore)

Completed

No. of Contracts Length in km No. of Contracts Length in km


ParticularsPhase Projected For (Kms) INR Crore

5. The developer has flexibility in project design so long as the build and service quality is in line with

prescribed standards set out in the Standards and Specification Manuals .

Cess and Market Borrowings

BOT/SPV

BOT/SPV

BOT/SPV


Budgetary Support

External Assistance


External Assistance

Total (At 1999 Prices)



BOT/SPV

BOT/SPV

BOT/SPV








Private Sector

Government Spending

7498

6647

12109

5000

6500

1000

700

18,846

3592

3310

23420

7609

7862

30300

34339

80626

35691

9000

10378

5519

7680

6302

6950

41210

16680

16680

4608

2342

50129

12809

17688

NHDP-I

NHDP-II

NHDP-III

NHDP-IV A

NHDP-V

NHDP-VI

NHDP-VII

stApproved Financing Plan of NHDP (as on 31 March, 2009)


Presently, the development and maintenance of

National Highways is financed by following modes:

1. Government's general budgetary sources

2. Dedicated accruals under the Central Road Fund

(by levy of cess on fuel)

3. Lending by international institutions:

• World Bank• ADB• JBIC

4. Private financing under PPP frameworks

• Build Operate and Transfer/Design Build 5Finance Operate and Transfer (DBFOT) -

Investment by private firm and return through

levy and retention of user fee

• Build Operate and Transfer (Annuity) - BOT

(Annuity ) - Investment by private firm and

return through semi-annual payments from

NHAI as per bid.

• Special Purpose Vehicle – SPV (with equity

participation by NHAI)

• Market Borrowings

NHAI also has a provision for providing grant upto 40%

of the project cost to make projects commercially

viable. However, the quantum of grant is decided on a

case to case basis and typically constitutes the bid

parameter in BOT projects generally not viable based

on toll revenues alone. The disbursement of such

grant is subject to provisions of the project concession

agreements (please refer CD for provisions in the

Model Concession Agreement).



Road Section Length (Km.)Estimated

Cost(INR Crore)

EstimatedCost

(USD Million)

Grant(INR Crore)

Grant(USD Million)

Delhi-Gurgaon

Rajkot Bypass-Jetpur

Panipat elevated Highways

Salem- Karur

Krishnagiri - Thopurghat

Tindivanam-Ulundurpet

Thirssur-Angamali

Jalandhar- Amritsar

Ambala-Zirakpur

Dhule-Pimpalgaon

Vadodara Bharuch

Bharuch-Surat

28

36

10

42

62

71

40

49

36

118

83

65

710

388

270

253

372

480

312

263

298

556

660

492

169

92

64

60

89

114

74

63

71

132

157

117

61

59

96

46

140

152

84

7

106

59

471

504

12

12

19

9

28

30

17

1

21

12

94

101

NHAI projects, with higher traffic volumes, have also been bid out on the basis of Negative Grant (upfront

payment payable by successful bidder to NHAI). However, under the revised MCA, projects under BOT/

DBFOT framework have also been awarded on a revenue share basis, where the bidder offering the highest

revenue share (subject to technical qualification) is awarded the project.

Road Section

Surat-Dahisar

Gurgaon-Jaipur

Panipat-Jalandhar

Chennai-Tada

Vijayawada-Chilkaluripet

Length (Km.)

239

225

291

42

85

EstimatedCost

(INR Crore)

EstimatedCost

(USD Million)Revenue Share (%)

2600

1900

2200

317

1173

619

452

523

76

280

38%

48%

20%

17%

2%

Projects awarded on Revenue Share Basis

Projects awarded on Negative Grant


Public Private Partnership in Highway Development

Public Private Partnerships (PPP) are going to be the

main mode of delivery for future phases of NHDP.

While there are a number of forms of PPP, the

common forms that are popular in India and have been

used for development of National Highways are:

• Build, Operate and Transfer (Toll) Model

• Build, Operate and Transfer (Annuity) Model

• Special Purpose Vehicle (SPV) for Port

Connectivity Projects

NHAI is also proposing to award projects under long

term Operations, Maintenance and Transfer (OMT)

concessions.

Private developers/ operators, who invest in tollable

highway projects, are entitled to collect and retain toll

revenues for the tenure of the project concession

period. The tolls are prescribed by NHAI on a per

vehicle per km basis for different types of vehicles. The

Government in the year 1995 passed the necessary

legislation on collection of toll. (Refer the National

Highways Fee [Determination of Rates and Collection]

Rules 2008).

A Model Concession Agreement (MCA) has been

developed to facilitate speedy award of contracts. This

framework has been successfully used for award of

BOT concessions. The MCA has been revised recently

and current projects are being awarded under the

revised MCA (refer enclosed CD for overview of MCA

framework).

The concessionaire bids for annuity payments from

NHAI that would cover his cost (construction,

operations and maintenance) and an expected return

on the investment. The bidder quoting the lowest

annuity is awarded the project. The annuities are paid

semi-annually by NHAI to the concessionaire and

BOT (Toll)

BOT (Annuity)

linked to performance covenants. The concessionaire

does not bear the traffic/ tolling risk in these contracts.

NHAI has recently taken up award of select highway

projects to private sector players under an OMT

Concession. Till recently, the tasks of toll collection

and highway maintenance were entrusted with tolling

agents/ operators and subcontractors, respectively.

These tasks have been integrated under the OMT

concession. Under the concession private operators

would be eligible to collect tolls on these stretches for

maintaining highways and providing essential

services (such as emergency/ safety services).

NHAI has also taken up development of port

connectivity projects by setting up Special Purpose

Vehicles (SPVs) wherein NHAI contributes upto 30%

of the project cost as equity. The SPVs also have equity

participation by port trusts, State Governments or their

representative entities. The SPVs also raise loans for

financing the projects. SPVs are authorised to collect

user fee on the developed stretches to cover

repayment of debts and for meeting the costs of

operations and maintenance.

General procedure for selection of concessionaires

adopted by NHAI is a two-stage bidding process.

Projects are awarded as per the model documents-

Request for Qualification (RFQ), Request for Proposal

(RFP) and Concession Agreement - provided by the

Ministry of Finance. NHAI amends the model

documents based on project specific requirements.

(Please refer CD for these model documents). The

processes involved in both stages are set out as

follows:

Stage 1: Pre-qualification on the basis of Technical and

Financial expertise of the firm and its track record in

Operate, Maintain and Transfer (OMT) Concession

Special Purpose Vehicle for Port Connectivity

Projects

International Competitive Bidding Process




similar projects which meets the threshold technical

and financial criteria set out in the RFQ Document.

Notice inviting tenders is posted on the web site and

published in leading newspapers.

Stage 2: Commercial bids from pre-qualified bidders

are invited through issue of RFP. Generally, the

duration between Stage 1 and 2 is about 30-45 days.

Wide publicity is given to NHAI tenders so as to attract

attention of leading contractors/ developers/

consultants.

The Government has put in place appropriate policy,

institutional and regulatory mechanisms including a

set of fiscal and financial incentives to encourage

increased private sector participation in road sector.

1. All applicants meeting the threshold technical and

financial experience criteria set out in the RFQ shall

be eligible to participate in the RFP stage. Earlier

only the top 5-6 applicants shortlisted based on

qualification criteria were eligible to submit

financial bids for projects.

2. NHAI is empowered to accept single bids based on

assessment of reasonableness of the bids.

3. Overall cap on Viability Gap Funding (VGF) increased

from 5% to 10% for the entire six-laning

programme (5080 km).

4. For individual projects with low traffic in the Golden

Quadrilateral (GQ) corridors, VGF cap has been

increased upto 20% of the project cost with an

overall cap of 500 km of roads in the project

network.

5. Equity Support under VGF has been increased to

40% of project cost. Earlier, 20% of project cost

was provided as equity support in construction

phase and 20% as Operations &Maintenance

Support

6. Modifications in Standard RFQ, RFP and

Concession Agreement structures for National

Highway Projects

a. Terminat ion prov is ions under capac i t y

augmentation situations modified to give more

comfort to investors and lenders. The concession

period can be extended upto 5 years to yield a post

Summary of recent policy changes in the project

development and award process are set out

below:

6. As per recommendations of B. K. Chaturvedi Committee.

tax equity IRR of 16%, in the event of capacity

augmentat ion opt ion exerc ised by the

concessionaire.

b. Exit option allowed for principal promoters of road

SPVs after two years from commercial operations

date (COD). Promoters were earlier required to hold

a minimum of 26% of the SPV’s shareholding at all

times during the tenure of the Concession.

c. Threshold limit for common control (shareholding)

of entities in competing Applicants and/ or their

Associates for the purposes of determining

Conflict of interest, raised from 5% to 25%.

Any such conflict of interest arising at the

prequalification stage shall be deemed to subsist at

the bidding stage only if such applicants attracting

the conflict of interest provisions submit their bids.

d. Threshold technical capability for claiming eligible

project experience has been reduced to a range

between 5-10% of estimated project cost of the

subject project in lieu of 10-20% of estimated

project cost of the subject project earlier.

e. The threshold technical experience score for the

purpose of prequalification will be equal to the

estimated project cost of the earlier subject project.

This was, earlier equal to twice the estimated

project cost of the subject project.

f. Where the projects are bid out on a revenue share

basis, the base premium (revenue share proposed

by the successful bidder) will be increased at the

rate of 5 per cent year on year with respect to the

immediately preceeding year for the entire tenure

of the concession.

6The aforesaid changes are expected to further

incentivise private investment in road/highway

projects.

More than 60% of the projected investment

requirement for the NHDP (USD 60 billion) is expected

to be privately financed, primarily through the

BOT/DBFOT (Toll) route, offering enormous

opportunities. With a large number of new projects on

offer under PPP in the road sector, there exists several

investment opportunities for investors and companies

with diverse business lines such as engineering

companies, civil work contractors, O&M contractors,

toll operators, construction equipment manufacturers

Opportunities for Private Investors/ Developers


Model Concession Agreement (MCA) for PPP

Projects

The highways sector in India has witnessed significant

investment in recent years. For sustaining the interest

of private participants, a clear risk-sharing and

regulatory framework has been spelt out in the Model

Concession Agreement (MCA). The MCA has been

developed to facilitate speedy award of contracts. This

framework has been successfully used for award of

BOT concessions. The MCA has been revised recently

and current projects are being awarded under the

revised MCA. This framework addresses the issues,

which are typically important for PPP, such as

unbundling of risks and rewards, symmetry of

obligations between the principal parties, equitable

sharing of costs and obligations, and risk mitigation

options under various scenarios including force

majeure and termination, under transparent and fair

procedures.

With the introduction of the MCA, the risks involved in

project and contractual issues, hitherto, have been

assuaged, and the entire process from invitation to bid

to implementation of the project is transparent.

MCA's risk framework is briefly discussed below:

The MCA has been developed in consultation with all

stakeholders based on internationally accepted

principles and best practices. Throughout, it seeks to

achieve reasonable balance of risks and rewards for all

the participants.

As an underlying principle, risks have been allocated to

the parties that are best suited to manage them.

Project risks have, therefore, been assigned to the

private sector to the extent it is capable of managing

them. The transfer of such risks and responsibilities to

the private sector would increase the scope of

innovation leading to efficiencies in cost and services.

The commercial and technical risks relating to

construction, operation and maintenance are

allocated to the concessionaire, as it is best suited to

manage them. Other commercial risks, such as the

rate of growth of traffic, are also allocated to the

concessionaire.

• The concessionaire is required

to commence construction works when the

financial close is achieved or earlier date that the

parties may determine by mutual consent. The

concessionaire shall not be entitled to seek

compensation for any prior commencement and

shall do it solely at his own risk.

• Concessionaire to operate and

maintain the project facility (includes road and

road infrastructure as specified in the concession

agreement). Failure to repair and rectify any defect

or deficiency within specified period shall be

considered as breach of responsibility.

• The concessionaire shall at its cost,

expenses and risk make such financing

arrangement as would be necessary to finance

the cost of the project and to meet project

requirements and other obligations under the

agreement, in a timely manner.

Risk Framework of Model Concession Agreement

Key Concessionaire Risk/Obligations

Construction Risk -

O & M Risk -

Financial Risk -


etc. and other stakeholders such as advisors,

financiers and sector professionals. Only about 15 per

cent of the total highways in India are 4-laned and the

sheer potential for investments in this sector is likely

to create opportunities in the core construction

industry which may also be attractive for foreign

players.

The opportunity for private players in the road sector

can be broadly categorised in two segments:

a) Infrastructure Development

b) Logistics and Services.

Containers

LuxuryBuses

Perishables Pvt Bus Service

UrbanTransportation

Trucking Tourism

Bulk

Roads

Logistics & Services

Development Projects

Construction Tolling

BOT/DBFOT

- Toll

Equipment Services

Material BOT -

Annuity

OMT

Equipment

Infrastructure Development

SPV

Technology

Maintenance


• The MCA provides for increase or

decrease of the concession period in the event the

actual traffic falls short or exceeds the target

traffic. NHAI stipulates the target traffic during the

year specified in project specific concession thagreement, which is usually around the 10 year

from the date of signing of the agreement. The

target traffic is determined based on 5%

Compounded Annual Growth Rate (CAGR) over

the base year traffic for the project. MCA also

provides for termination of the agreement if the

average daily traffic in any accounting year

exceeds the design capacity and continues to

exceed for three subsequent accounting years.

Termination payments under this scenario will be

commensurate to those applicable under an

Indirect Political Event (See table in next section on

page 26).

An overview of revenue risks and mitigation

(including Termination Payment) under the MCA is

provided in the next section.

• Land Acquisition Risk: NHAI is responsible for

acquiring the requisite land for the project highway

• NHAI will provide all reasonable

support and assistance to the concessionaire in

procuring applicable permits required from any

Government Instrumentality.

• Force Majeure shall mean

occurrence in India of any or all of Non-Political

Event(s), Indirect Political Event(s) and Political

Event(s), which include the following:

• act of God, epidemic, extremely adverse

weather conditions or radioactive contamination

or ionising radiation, fire or explosion;

• strikes or boycotts

Traffic Risk -

Approvals:

Force Majeure Risk -

Key NHAI Risk/Obligations

Key Common Risk

Non-Political Event:

• the discovery of geological conditions, toxic

contamination or archaeological remains on the

Site; or

• any event or circumstances of a nature

analogous to any of the foregoing.

• an act of war, invasion, armed conflict or act of

foreign enemy, blockade, embargo, riot,

insurrection, terrorist or military action,

• civil commotion or politically motivated

sabotage which prevents collection of toll/

fees,

• industry-wide or state-wide or India-wide

strikes or industrial action which prevent

collection of toll/ fees,

• any public agitation which prevents collection

of toll/ fees

• Change in Law,

• compulsory acquisition by any governmental

agency of any project assets or rights of

concessionaire or of the Contractors; or

• unlawful or unauthorised or without jurisdiction

revocation of or refusal to renew or grant

without valid cause any consent or approval

required by developer

• Substantial part of the project site free from

encumbrances would be handed over to the

concessionaire till the Appointed Date. Additional

land in case of change of scope will need to be

acquired by concessionaire on behalf of the

Authority.

• Additional tollway will not be commissioned

within a specified year, depending upon the

concession period. Minimum user fee for

additional tollway will be at least 25% higher than

Indirect Political Event

Political Event

Salient features of the MCA



the toll fee on project. Any alternate road,

exceeding 20% of the length of the project

highway, shall not be considered as an additional

tollway.

• The concessionaire will be entitled to nullify any

change of scope order if it causes the cumulative

cost relating to all change of scope orders to

exceed 5% of the Total Project Cost (TPC) in any

continuous period of 3 years immediately

preceding the date of such Change of Scope

order, or if such cumulative cost exceeds 20% of

the TPC at any time during the concession period.

• Financial close is to be achieved within 180 days

from date of agreement. NHAI may allow

additional period for financial close on a project

specific basis.

• Grant (upto 40% of TPC) to the concessionaire by

way of equity support and operations &

maintenance support in quarterly installments. (B.

K. Chaturvedi Committee has recommended that

the entire grant [up to 40% of TPC] can be

provided as equity support)

• Concessionaire to pay nominal fee of INR 1 (USD

0.02) per annum throughout the concession

period.

• There is an optional provision for capacity

augmentation of existing 4-laning to 6-laning. If

capacity augmentation is not done within the

specified period, the concession period gets

reduced to the number of years specified in the

project specific agreement. The option to excuse

from 6-laning of the Project Highway is available

with both the concessionaire and the Authority

before the pre-specified 6-laning date in the

concession agreement.

• Completion of preparatory works for the identified

projects

• Finalisation of Bidding Documents

• Invitation of Bids

• Pre bid Conference

• Evaluation of Bids

• Award of Concession

• Signing of the Agreement

Any dispute arising out of or in relation to the

concession agreement, between the parties is

Implementation steps of Project

Dispute Resolution




required to be resolved as per the Dispute Resolution

Procedure (see below) prescribed in the Agreement. It

specifies that the parties should attempt to resolve the

dispute amicably and for this purpose, the mandate

has been given to an Independent Engineer to

mediate and assist the parties to arrive at a

settlement. The procedure has been laid out in

sufficient detail therein.

However, upon the failure of such conciliatory

measure, the parties shall resort to Arbitration, which

shall be held in accordance with Arbitration and

Conciliation Act, 1996 (based on United Nations

Commission on International Trade Laws -UNCITRAL

model). The seat of arbitration for all concession

agreements pertaining to National Highways shall

ordinarily be at Delhi, however, the place may be

changed by mutual consent of the parties. Each party

is free to nominate its arbitrator who in turn, will

appoint a presiding arbitrator. The Arbitration Tribunal

so constituted can adjudicate any dispute referred to

it, and any other question of law arising out of such

dispute, including its own jurisdiction. The award

passed by such Tribunal, has the sanctity of a 'Decree'

under Indian Law and can be challenged on very

limited counts.

• If any

dispute arises between the parties, it is in the first

place resolved by the mediation of the

Independent Engineer. Any dispute, which is not

resolved by mediation of the Independent

Engineer, is resolved by amicable resolution.

• Any dispute, difference or

controversy of whatever nature between the

parties, arising under, out of or in relation to the

project concession agreement (PCA) is attempted

to be resolved amicably in accordance with the

procedure set forth in the dispute resolution

mechanism. Either party may require such dispute

to be referred to the Chairman, NHAI and the Chief

Executive Officer of the concessionaire in the

interim, for amicable settlement. Upon such

reference, the two shall meet at the earliest

mutual convenience and in any event not later than

15 days of such reference to discuss and attempt

Dispute Resolution Procedure for projects under

BOT and Consultancy

Mediation by the Independent Engineer:

Amicable Resolution:

to amicably resolve the dispute. If the dispute is

not amicably settled within 15 (fifteen) days of

such meeting between the two, either party may

refer the dispute to arbitration in accordance with

the provisions of the PCA.

• Any dispute, which is not resolved

amicably, shall be finally settled by binding

arbitration under The Arbitration Act. The

arbitration shall be carried out by a panel of three

arbitrators, one to be appointed by each party and

the third to be appointed by the two arbitrators

appointed by the parties. The party requiring

arbitration shall appoint an arbitrator in writing,

inform the other party about such appointment

and call upon the other party to appoint its

arbitrator. If within 15 days of receipt of such

intimation the other party fails to appoint its

arbitrator, the party seeking appointment of

arbitrator may take further steps in accordance

with the Arbitration Act.

The Dispute Resolution Procedure for EPC

Projects does not involve amicable settlement.

The disputes are referred to the Dispute Review

Board.

• The Board shall comprise

of three members, experienced with the type of

construction involved in road works, and with the

interpretation of contractual documents. If, during

the contract period, either of the parties is of the

opinion that the Dispute Review Board is not

performing its functions properly, they may

together disband the Board and reconstitute it.

• In the

case of a dispute with a foreign contractor, the

dispute shall be settled in accordance with the

provisions of the UNCITRAL Arbitration Rules. The

arbitral tribunal shall consist of three arbitrators,

one each to be appointed by the employer and the

contractor and the third arbitrator chosen by the

two arbitrators so appointed by the parties, who

shall further act as the Presiding Arbitrator.

A “Foreign Contractor” means a contractor who is

not registered in India and is not a juridical person

under Indian Law.

Arbitration:

Dispute Review Board:

Dispute involving Foreign Contractor(s):


General Trends in Dispute Resolution

OMT Concessions

The Courts in India have been very neutral in

construing the documents, in the cases arising out of

tender processes and rely upon terms and conditions

agreed between the parties under the tender

documents. The provisions of the Contract Act and

other legal provisions, covering the intricate

commercial aspects of the dispute are looked into

very minutely before passing any order. The Courts

have, however, been very cautious in passing any

injunctive relief in disputes arising out of tender

process and pays due regard to the fairness in the

process of issuing tender and selection of bidders,

stage of infrastructure development and stakes

(public money) involved. Where complex financial

issues are involved, the Courts also seek advice of an

expert committee and consider various factors like

price index, quality of work, past performance of

parties, market reputation, etc. The decision in each

case may however differ, depending upon facts of

each case.

• The OMT concession would be for a maximum

period of 9 years

• The private sector will be selected on the basis of a

competitive bidding process. The successful

bidder would be the one offering the highest 7

concession fee to NHAI .

• The concessionaire is allowed a period of 45 days

from the date of signing of the concession

agreement to commence commercial operations.

• The OMT concessionaire will pay a fixed

concession fee to NHAI every month and

undertake tasks of toll collection and mobilisation

of funds for improvement, operation and

maintenance of highways

NHAI has identified eight highway sections which are

to be awarded on OMT contracts. The concession

agreements for two highway sections have been

signed and the pre-qualification of bidders for the

remaining six sections is under process. More

sections, where project completion is anticipated in

the next 6-12 months, are being planned for OMT

concessions.


7. The bidder offering the maximum amount of first year concession fee or minimum amount of first year quarter O&M support (in case no bidder offers the concession fee).



Opportunities for Investment-State-Wise Projects Under NHDP Phase II

S. No. Stretch NHLength (Km)

Estimated Project Cost

(INR Crore) (USD Million)

Banihal-Batole-Udhampur

Srinagar-Khanbal-Banihal

Two Tunnels on Udhampur-Banihal-

Srinagar Section

Udhampur Jammu (0-66)

Walayar-Vadakkancherry

Udarband to Harangajo 54

1A

1A

1A

1A

47

31

122

32

19

86

55

202

1035

129

5000

1011

600

207

26

1000

202

120

40

STATE: Assam

1

STATE: Jammu & Kashmir

1

2

3

4

STATE: Kerala

1

Jallandhar-Amritsar

Salem-Coimbatore Kerala

Border Section

Agra Bypass Km176-800 of NH-2 to

Km 13.03.0 of NH-3

1

47

23

20

82

33

190

540

345

36

108

69

STATE: Punjab

1

STATE: Tamil Nadu

1

STATE: Uttar Pardesh

1


Opportunities for Investment-State-Wise Projects Under NHDP Phase III-A




Vijaywada-Machhlipatnam

Tirupati-Tiruthani-Chennai

Patna-Bakhtiarpur

Rohtak-Hissar

Mulbagal-Kamataka/AP Border

Balgaum-Goa/KNT Border

Mangalore-KNT/Kerala Border

Ottira-Thiruvananthapuram

Trivendrum-Kerala/Tamil Nadu Border

Kerala/Tamil Nadu Border Kanyakumari

9

205

30

10

4

4A

17

47

47

47

65

138

53

80

11

84

18

123

43

70

424

900

346

522

72

548

117

805

280

456

85

180

69

104

14

110

23

161

56

91

STATE: Andhra Pradesh

STATE: Bihar

STATE: Haryana

STATE: Karnataka

STATE: Kerala

1

2

1

1

1

2

3

1

2

3





Nagpur-Wainganga Br

Chandikhole-Duburi

Panikoili-Roxy

Duburi-Talcher

Roxy-Rajamunda

Chandigarh-Kurali

Parwanoo-Shimla (Punjab,

Haryana and HP)

6

200

215

200

215

21

22

60

39

249

98

20

30

110

391

254

1623

639

130

195

717

78

51

325

128

26

39

143

STATE: Maharashtra

1

STATE: Orissa

1

2

3

4

STATE: Punjab

1

2

Reengus-Sikar

Tonk-Kota-Deoli

Deoli-Jhalawar

Nagapatnam-Thanjavur

Krishnagiri-Tindivaram

Trichy-Puddukotai-Ramanathapuram

11

12

12

67

66

210

41

64

178

74

170

200

267

417

1161

482

1108

1304

53

83

232

96

222

261

STATE: Rajasthan

1

2

3

STATE: Tamil Nadu

1

2

3

Barasat-Bangaon 35 60 391 78

STATE: West Bengal

1





Opportunities for Investment-State-Wise Projects Under NHDP Phase III-B

Itanagar-Arunachal Pradesh/

Assam Border

Doboka-Assam/Nagaland

Border-Dimapur

Baihata Chariali-Banderdewa

Badardewa-Assam/

Arunachal Pradesh Border

Assam/Meghalaya Border to Assam/

Tripura Boder

Silchar-Assam/Mizoram Border

Muzaffarpur-Sonbasra

Motihari-Raxaul

Bakhtiarpur-Begusarai-Khagarai-Purnea

Gopalganj-Chapra-Hajipur

Forbesganj-Jogwani

Mokama-Munger

Patna-Buxar

Kumud-Dhamtari

Raipur-Simga

Panaji-Goa/KNT Border

Maharashtra/Goa Border-Panaji Goa/

KNT Border

52A

36

52

52A

44

54

77

28A

31

19 & 85

57A

80

84

43

200

4A

17

22

124

314

9

116

50

89

67

255

153

13

70

130

23

28

69

139

143

808

2047

59

756

326

580

437

1663

998

85

456

848

150

183

450

906

29

162

409

12

151

65

116

87

333

200

17

91

170

30

37

90

181

STATE: Arunachal Pradesh

1

STATE: Assam

1

2

3

4

5

STATE: Bihar

1

2

3

4

5

6

7

STATE: Chhatisgarh

1

2

STATE: Goa

1

2





Jetpur-Somnath

Gujarat/Maharashtra Border-Surat

Gujarat/MP Border-Ahmedabad

Srinagar-Baramula-Uri

KNT/Kerala Border-Khozikode-Eddapally

Kalamboli-Mumbra (6 Laning)

Panvel-Indapur

Bhopal-Rajmarg Crossing-Jabalpur

Bhopal-Sanchi

Obaiduliaganj-Bheembetka

Jhansi-Khajuraho

Nagaland/Manipur Border-Imphal

Assam/Mizoram Border-Aizawi

8D

6

59

1A

17

4

17

12

86(Ext.)

69

75

39

54

127

84

210

101

451

20

84

297

40

13

100

140

113

828

548

1369

659

2941

130

548

1936

261

85

652

913

737

166

110

274

132

588

26

110

387

52

17

130

183

147

STATE: Gujarat

STATE: Jammu & Kashmir

STATE: Kerala

STATE: Maharashtra

STATE: Madhya Pradesh

STATE: Manipur

STATE: Mizoram

1

2

3

1

1

1

2

1

2

3

4

1

1





Shillong (excluding Shillong Bypass)-

Assam / Meghalaya Border

Kohima-Nagaland-Manipur Border

Sambalpur-Baragarh-Chattisgarh/

Orissa Border

Bhubaneshwar-Puri

Amritsar

44

39

6

203

15

136

28

84

59

101

887

183

548

385

659

177

37

110

77

132

STATE: Meghalya

1

STATE: Nagaland

1

STATE: Orissa

1

2

STATE: Punjab

1

STATE: Rajasthan

Beawar-Pali-Pindwara

Bareilly-Sitapur

14

24

246

153

1604

998

321

200

1

STATE: Uttar Pradesh

1

Tripura/Assam Border to Agartala

Dindigul-Perigulam-Theni

Madurai-Ramnathpuram-

Rameshwaram-Dhanushodi

Coimbatore-Mettupalayam

Theni-Kumili

44

45(Ext.)

49

67(Ext.)

220

195

73

186

45

57

1271

476

1213

293

372

254

95

243

59

74

STATE: Tirpura

1

STATE: Tamil Nadu

1

2

3

4


Opportunities for Investment-State-Wise Projects Under NHDP Phase V




Chilkaluripet-Vijayawada-Elluru-

Rajamundri

Tada-Neliore Bypass

Vishakapatnam-Ankapalli-Rajamundri

Srikakulam-Vishakhapattanm Ankapalli

Neliore-Chilkaluripet

Icchapuram-Srikakulam

Aurangabad-Barwa Adda

Vanarasi-Aurangabad

Ahmedabad-Vadodara Expressway

5

5

5

5

5

5

2

2

NE-1

270

130

200

100

184

140

70

140

95

1712

824

1268

634

1167

888

444

888

602

342

165

254

127

233

178

89

178

120

STATE: Andhra Pradesh

1

2

3

4

5

6

STATE: Bihar

1

2

STATE: Gujarat

1

2 Udaipur-Ahmedabad

Barwa Adda-Panagarh

Aurangabad-Barwa Adda

Gurgaon-Kotputli-Jaipur

(Haryana portion)

8

2

2

8

140

100

150

126

888

634

951

799

178

127

190

160

Delhi-Ahmebad 1 140 888 178

STATE: Jharkhand

1

2

STATE: Haryana

1

2

Guidelines for Investment in Road Sector




Bangalore-Tumkur

Hubli-Chitradurga

Chitradurga Bypass-Tumkur Bypass

Bangalore-Krishnagiri

Belgaum-Hubli

Kagal-Belgaum

Satara-Kagal-Belgaum

4

4

4

7

4

4

4

65

200

145

55

110

77

133

412

1268

919

349

697

488

843

82

254

184

70

139

98

169

STATE: Karnataka

1

2

3

4

5

6

STATE: Maharashtra

1

24

Revenue realisation in BOT-Toll projects is subject to

some key risks including, but not limited to variation in

traffic, variation in toll rates, additional tollway,

occurrence of premature termination on account of

certain events. The concession agreement provides

for various risk mitigation mechanisms to the

concessionaire including change in concession period,

differential toll rates that are linked to cost of different

road structures under the new toll rules (linear

alignment, bridges, tunnels, bypasses etc.) to

providing for termination payments under force

majeure events.

The concession agreement provides for extension or

reduction of the concession period in the event the 9actual traffic falls short or exceeds the target traffic , as

10estimated on the target date .

MCA also provides for termination of the agreement if

the average daily traffic in any accounting year

exceeds the design capacity and continues to exceed

for three subsequent accounting years. Termination in

such scenario will be deemed to happen on account of

an Indirect Political Event.

The notification of the New National Highways Fee

Rules (2008) has provided for a revision of toll rates

and hence realisable toll revenues for all vehicle

categories. The new toll rules are applicable for all new

road projects.

Variation in Toll rates (Linked to WPI)

Type of Variation Change in

Concession PeriodCap on Concession

Period Variation

Variation in Traffic

Actual Traffic < Target Traffic

For every 1% shortfall,concession period increase by 1.5%

20%

10%Actual Traffic > Target Traffic

For every 1% excess,concession period

8reduction by 0.75%

8. Waiver from concession period reduction can be obtained on payment of premium9. The method for calculating Actual Traffic and Target Traffic is detailed in the MCA10. Target Date is around 10 years from the date of the agreement in a 20 year concession period


Revenue Risks and Mitigation

Old Toll Rate Rs./ trip (USD)

11New Toll RatesRs./ trip (USD)

Scenario 1

Light Motor Vehicle Light Commercial Vehicle

79(~1.57)

80(~1.6)

128(~2.5)

130(~2.6)

Scenario 2

Light Motor Vehicle Light Commercial Vehicle

79(~1.57)

120(~2.4)

128(~2.5)

185(~3.7)

Event of Default

During construction(after financial

closure)During operations

Concessionaire event of default

No payment Payment equal to 90% of debtdue less insurance claims if any.

NHAI event of default

a. the total Debt Due 12b. 150% of the Adjusted Equity.

Force Majeure

Non-Political Event

Payment equal 90% of the Debt Due less Insurance Cover

Indirect Political 13Event

a. Debt Due Less Insurance Coverb. 110% of the Adjusted Equity

Political Event a. the total Debt Dueb. 150% of the Adjusted Equity


The salient features of the new toll rules are:

• Increase in base toll rates by 3% every year

• Increase in toll charges to the extent of 40% of the

increase in WPI.

• Toll charges for new structures (bridges,

tunnels)/alignments (bypass, alternate section)

determined based on construction cost.

• Rounding off fee to the nearest five rupees (earlier

rounded off to nearest 1 Rupee).

While the earlier tolling rules prescribed a standard

base toll rate on a per passenger car unit (pcu)/km

basis for a highway project, the new rules prescribe

base toll rates also for high-cost structures (such as

bridges, bypass or tunnels) separately. The base toll

rates for such high-cost structures are indexed to the

estimated project cost (on INR/vehicle/trip basis).

Provided below is an illustration of toll revenues

earned from a Light Motor vehicle and Multi Axle

Vehicle (MAV of three to six axles) as per the

applicable toll rates under the old and new toll rules

respectively.

The toll charge at the end of fifth year has been

calculated under two project development scenarios.

In Scenario 1, a linearly aligned highway stretch

(without bypasses and bridges) of 100 km has been

considered. In Scenario 2, the highway stretch

includes a linear alignment of 80 km and bypass length

of 20 km. The increase in WPI is assumed to be 5%

p.a.

The table above shows that for a given base toll rate,

the toll charges determined by the new toll rules are

higher. The toll charges are significantly higher in

Scenario 2, where higher construction cost of the

bypass is reflected in the toll charges.

Complete details of the new National Highway Fee

(Determination of Rates and Collection) Rules, 2008

are provided in the enclosed CD

The concession may be terminated before project

completion in the event of the following:

• NHAI Event of Default: In the event of any of the

defaults specified in the concession agreement

which the Authority has failed to cure within 90

days or such longer period as has been specified in

the agreement, the Authority shall be deemed to

be in default and concessionaire shall have the

right to terminate the agreement

Early Termination of Concession

11. As per new tolling rules, toll rate revision is determined by the formula - TR = TR (1+3%) + TR ((1+3%)*%Variation in WPI*40%)1 0 0

12. Adjusted equity is equity funded in Indian Rupees adjusted suitably to reflect change in value of equity on account of depreciation and variations in WPI at different periods during the Concession Period

13. including termination due to breach of capacity as set out under traffic risk


• In the event of

any of the defaults specified in the concession

agreement which the concessionaire has failed to

cure within the specified cure period, and where

no such cure period has been specified, then

within the cure period of 60 days, the

concessionaire shall be deemed to be in default

and NHAI shall have the right to terminate the

agreement

• A force majeure event which

lasts for less than 180 days will lead to a

Concessionaire Event of Default:

Force Majeure Event:

proportionate change in the concession period to

compensate the concessionaire for losses during

such period.

The concession is eligible to be terminated (by

either party) if the force majeure event subsists for

at least 180 days within a continuous period of 365

days

Termination payments are made by NHAI to the

concessionaire in the event of termination due to

above mentioned reasons

Overview of Successful Projects

Source: NHAI

Number of Contracts Cost in

BOT Toll

Awarded 104

Completed 32

BOT DBFO

Awarded 8

Completed

BOT Annuity

Awarded 28

Completed 13

INR Crore USD Billion

8058

1742

1034

1158

804

13.7

2.3

2

2.2

0.9

68587

11689

7785

11186

4608

PPP is gradually proving to be a successful

mechanism for developing and maintaining the

National Highways, as is evident from the increased

private sector participation in projects till date.

Toll collection depends on two factors - traffic volume

and tolling rate. The toll rates are pre-specified by

NHAI. Estimates of traffic growth for projects are also

provided by NHAI based on detailed feasibility studies.

However, bidders are advised to carry out

independent due-diligence of the traffic and growth

estimates. The profitability of tolled National Highways

has made the sector extremely competitive and

attractive. In light of the forecasts for traffic growth on

important road corridors, the Government has given

first preference to Build-Operate Transfer

(BOT/DBFOT) toll projects.

Jaipur-Kishangarh is one of the earliest projects

implemented on BOT framework. The project involved

4-laning a length of approximately 91 km from Jaipur

to Kishangarh (NH-8), in the state of Rajasthan at an

estimated cost of INR 644 Crore (USD 129 million-

NHAI estimate). NHAI provided a grant of INR 211

Crore (USD 42 million) to the project. The concession

period of the project is 20 years.

Jaipur- Kishangarh BOT Project –NH 8

The project was completed 5 months ahead of its

schedu led comp le t ion da te (20 05 ) . The

concessionaire also earned a bonus of INR 42.25

Crore (USD 8.5 million) in the form of early tolling

during the period before scheduled completion date.

Even today, the concessionaire is earning more

revenues than those projected at the time of bidding.

However, the excess revenue is being shared

between the concessionaire and NHAI as per the

revenue sharing clause in the agreement.

The project involved widening of existing two lanes to

4-lane divided carriageway facility including the

rehabilitation of existing 2-lanes on annuity basis. The

estimated cost of this 78 km long road project is INR

332 Crore (USD 66.4 million; NHAI Estimate). The

section has two toll plazas.

The project was awarded to the consortium of M/s

ILFS, M/s Punj Lloyd Ltd. and M/s Consolidated Toll

Network India Ltd. The concession period is 17 years

and 6 months. The concessionaire completed the

project in October 2004, two months earlier than the

stipulated project completion date, and was paid a

(performance) bonus of INR 42.16 Crore (USD 8.4

million) on account of early completion.

This bridge is one of the first BOT projects, undertaken

by NHAI in 1995. The concession agreement was

signed in September, 2002.The consortium members

are from USA, U.K, Mauritius and India. Though the

financial close was delayed by one year, the

Belgaum – Maharashtra Border Section of NH-4

(Annuity Project)

Second Vivekananda Bridge (now Sister Nivedita

Bridge)- BOT Project in Kolkota:


construction thereafter was almost on time and the thbridge was commissioned on 4 July, 2007. This bridge

also won the award of excellence for the year 2007

under the Foreign Bridge Project Category from the

American Segmental Bridge Institute. NHAI had

provided a grant of INR 120 Crore (USD 24 million) out

of the total project cost of INR 640 Crore (USD 128

million). The concession period of the project is 30

years.

This project has been undertaken as part of a

programme for adequate road connectivity to major

ports through an SPV of NHAI (Jawaharlal Nehru Port

Road Company Limited). Phase-1 of the project, with a

length of 30 km for 4-laning of NH-4/4B, built at an

estimated cost of INR 177 Crore (USD 35.4 million)

was commenced in February 2002 and was

completed in July 2005. This project is a symbolic

representation of a successful venture of NHAI,

Jawaharlal Nehru Port and State Government

(CIDCO). Phase-II of

the project for 4-laning of 14 km and the 6-laning of

Panvel Creek Bridge (length: 397m) at a cost of INR

143 Crore (USD 29 million) has been taken up and

likely to be completed soon. Encouraged by the

results, Phase –III at a cost of INR 279 Crore (USD 56

million), is also being taken up. The concession given

to the SPV of NHAI is for 20 years from December

2000. The SPV made profits (after tax) of INR 16.4

Crore (USD 3.3 million), INR 20.3 Crore (USD 4 million)

& INR 21.7 Crore (USD 4.3 million) in 2005-06, 2006 -

07 & 2007-08 respectively.

Foreign contractors started participating in NHDP

contracts (and to a limited extent in state highway

projects) from 2000-01. In 2000-01, there were about

20 contracts in the NHDP, where foreign contractors

participated either or in joint ventures; the

number grew to about 32 in 2003. The foreign

contractors taking part were from Malaysia, Korea,

China, Russia, Turkey, Indonesia, Iran and some niche

contractors from Europe for specialised jobs. It is

presently estimated that about a dozen foreign road

contractors are operating in India.

Jawaharlal Nehru Port Connectivity Project in

Maharashtra

Participation of Foreign Contractors

represented by City and Industrial Development

Corporation of Maharashtra Ltd.

on their own

Foreign companies are executing 27 contracts

exclusively and 71 contracts as joint venture partners

with Indian companies. Foreign investors are allowed

100 per cent foreign direct investment in road sector

(Please refer section on page 36). The total value of

contracts with foreign participation is estimated to be

more than INR 12,000 Crore (USD 2.4 billion)

Construction Firms

No. of Foreign Firms

No. of Projects

Length (in km)

BOT (Toll) 22 22 2352

BOT (Annuity) 6 6 4150

EPC Contracts 67 67 3300

S. No. Country Contractors

JV Independent

China

Dubai

Malaysia

Iran

Singapore

Saudi Arabia

UK

Indonesia

Korea

Spain

Taiwan

Thailand

Turkey

Philippines

USA

Russia

Italy

Total

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

11

1

25

1

1

1

4

2

9

5

1

2

2

1

1

2

2

71

2

0

10

0

0

0

0

2

5

0

4

1

0

0

1

2

0

27

Country wise breakup of Foreign and JV

Companies involved in development work of

National Highway Projects


NHDP Phase-III

NHDP Phase-V

NHDP Phase-IV

1 Meghalaya Jowai-Meghalaya/Assam Border 44 104

Sub-Total 104

2 Punjab Ludhiana - Talwandi 95 78

Sub-Total 78

3 Rajasthan Kota-Jhalawar 12 55

Sub-Total 55

4 Uttarakhand Rampur-Kathgodam 87 88

Sub-Total 88

5 West Bengal Barasat-Petrapole 35 60

Sub-Total 60

Total NHDP III 307

6 Andhra Pradesh Vijayawada-Elluru-Rajamundry 5 198

7 Andhra Pradesh Ichapuram-Srikakulam-Vishakapatnam - Rajahmundri 5 436

Sub Total 634

8 Karnataka Dharwad-Haveri 4 95

9 Karnataka Khagal-Belgaum 4 77

Sub Total 172

10 Orissa Chandikhole-Paradeep 5A 80

Sub Total 80

11 Punjab Ludhiana-Chandigarh 95 & 21 85

Sub Total 85

12 Uttar Pradesh Agra-Etawah Bypass 3 125

13 Uttar Pradesh Allahabad Bypass-Varanasi 2 160

14 Uttar Pradesh Aurangabad-Barwa Adda 2 220

15 Uttar Pradesh Etawah-Chakeri 2 157

16 Uttar Pradesh Chakeri-Allahabad 2 153

Sub Total 815

Total Phase V 1786

17 Bihar Muzaffarpur-Barauni 28 107

18 Bihar Chhapra - Rewaghat - Muzzaffarpur 102 75

Sub Total 182

19 Chattisgarh Arang-Saraipalli-Orissa Border 6 150


Work Plan-II (2010-11)Sl. No. State Section NH No. Length km


20 Chattisgarh Chilpi-Simga 12A 128

21 Chattisgarh Raipur to Dhamtari 43 72

22 Chattisgarh Dhamtari-Jagdalpur 43 222

23 Chattisgarh/Jharkhand Pathalgaon to Gumala 78 130

24 Chattisgarh Ambikapur to Pathlgaon 78 85

25 Chattisgarh Bilaspur-Ambikapur 111 190

26 Chattisgarh Raipur-Bilaspur 200 112

Sub Total 1089

27 Himachal Pradesh Bilaspur to Ner Chowk 21 54

28 Himachal Pradesh Ner Chowk to Manali 21 119

Sub Total 173

29 Jharkhand Junction with Govindpur at

NH-2-Dhanbad-Bokaro-Ramgarh 32 & 33 130

30 Jharkhand Junction with NH-2 at Govindpur-Chas-Upto

JHR/WB Border 32 71

31 Jharkhand/ West Bengal Jamshedpur-Kharagpur 6 & 33 150

Sub Total 351

32 Karnataka Hospet-Chitradurga 13 119

33 Karnataka Bellary-Gooty 63 77

34 Karnataka Hospet-Hubli-Ankola 63 271

35 Karnataka Hoskote to Dobespet 207 89

36 Karnataka Kozhikode (Kerala Border)-Gundlupet-Coimbatore 212

(Kerala Border) & 67 63

37 Karnataka Gulbarga-Bijapur-Homnabad 218 200

Sub Total 819

38 Madhya Pradesh Gwalior-Dewas 3 450

39 Madhya Pradesh Jabalpur- Lakhnadon 7 74

40 Madhya Pradesh Biaora- MP/Rajasthan Border 12 Ext. 66

41 Madhya Pradesh Jabalpur-Mandla-Chilpi 12A 189

42 Madhya Pradesh Obadullaganj - Betul 69 143

43 Madhya Pradesh/ Betul- Nagpur 69 176

Maharashtra

44 Madhya Pradesh Jabalpur-Katani-Rewa 7 210

Sub Total 1308

Sl. No. State Section NH No. Length km


45 Maharashtra Amravati-Dhule-Gujrat Border 6 450

46 Maharashtra Khed-Nasik 50 180

47 Maharashtra Vedishi-Osmanabad-Solapur 211 85

48 Maharashtra Dhule-Aurangabad 211 140

49 Maharashtra/ Solapur-Sangareddy 9 234

Andhra Pradesh Sub Total 1089

50 Orissa Baleashwar-Baripada-Jharpokhria

(Jn. of NH-5 with NH-6) 5 90

51 Orissa Jn. with NH-6 at Sambalpur with NH-5 in Cuttack 42 261

52 Orissa Bahargora-Sambalpur 6 370

53 Orissa Birmitrapur-Palhara 23 128

Sub Total 849

54 Punjab Sri Ganganagar-Amritsar 15 172

55 Punjab/ Haryana Jullundhar-Jind 71 350

Sub Total 522

56 Rajsthan/Gujarat Padhi-Dahod 113 123

57 Rajsthan/ Jhalawar-Biaora 12 121

Madhya Pradesh Sub Total 244

58 Tamil Nadu Thanjavur - Pudukkotai - Sivaganga -

Manamadurai 226 122

59 Tamil Nadu Tiruchirapalli-Lalgudi-Chidambaram &

Meenusuriti-Jayamkondam-Kootu Road

[km 90.20 to km 93.00 (common stretch 45C

with km 96.80 to km 99.60 of NH 227)] & 227 135

60 Tamil Nadu Vikravandi-Kumbakonam-Thanjavur 45C 165

Sub Total 422

61 Uttar Pradesh Nepal Border - Varanasi 233 292

62 Uttar Pradesh Varanasi-Lucknow 56 300

63 Uttar Pradesh Varanasi-Hanumanha 7 70

64 Uttar Pradesh Lucknow - Rai Bareilly 24 B 82

65 Uttar Pradesh Unnao - Lalganj 232 A 68

66 Uttar Pradesh Moradabad - Aligarh 93 71

67 Uttar Pradesh Meerut - Nazibabad 119 139

68 Uttar Pradesh Meerut - Bulandshahar 235 66

69 Uttar Pradesh/Rajasthan Bharatpur-Mathura-Hathras SH 90


70 Uttar Pradesh Rai Bareilly - Jaunpur 231 169

71 Uttar Pradesh Ambedkar Nagar - Banda 231 287

72 Uttar Pradesh Barabanki-Bahraich-Nanapara-Rupaidiha 28 C 152

73 Uttar Pradesh Gorakhpur-Ferenda-Nautanwa-Sonauli 29 E 99

Sub Total 1885

74 Uttarakhand/ Chutmalpur-Saharanpur-Yamunanagar-Haryana/

Uttar Pradesh UP Border 73 50

75 Uttarakhand Dehradun-Chutmalpur-Roorkee 72 A 70

76 Uttarakhand Sitarganj-Tanakpur 125 52

77 Uttarakhand/ Haridwar-Kashipur 74 167

Uttar Pradesh Sub Total 339

78 West Bengal Pundlbari-Baxirhat 31 46

79 West Bengal JHR/WB Border-Purliya-Balarampur-JHR/WB

border-upto junction with NH-33 at Chandil

(Jharkhand) 32 82.5

Sub Total 128.5

Total Phase IV 9400.5

80 Assam Demow-Dibrugarh 37 64

81 Assam Numaligarh-Jorhat 37 56

82 Assam Jorhat-Demow 37 81

Sub Total 201

83 Nagaland Dimapur-Kohima 39 81

Sub Total 81

Total SARDP-NE 282

Grand Total 11775.5

SARDP-NE



National Highways Policy Initiatives

The government has adopted a road development

policy setting out the guidelines for investment in

highways. In order to meet the huge investment

requirements in the sector, the government has taken

a number of measures to attract private sector

participation.

• The government has permitted 100 per cent

foreign equity in construction and maintenance of

roads, highways, tunnels etc.

• Grant upto 40% of project cost to make project

viable.

• 100% tax exemption in any 10 consecutive years

within a period of 20 years after completion of the

project.

• Agreements to avoid double taxation with a large

number of countries

• Concession period upto 30 years

• Right to charge tolls on certain (toll) projects.

These tolls are indexed to a formula linked with

the wholesale price index.

• The government permits duty free import of high

capacity equipment required for highway

construction.

• Government support for land acquisition,

resettlement and rehabilitation.

• Simplified procedure for Land Acquisition

• MCA for BOT (Annuity) and OMT are being

finalised.

• New rules for collection of fee for use of sections of

national highway, permanent bridges, bypasses and

tunnels have been put into place. The illustration of

revenue collection for new projects under the new

policy is provided in the earlier section.

Policy Framework

Viability Gap Funding Scheme ( VGF)

The VGF scheme provides financial support in the

form of capital grant for PPP projects in various

infrastructure sectors. VGF Scheme is intended to

support projects which are commercially unviable but

have high economic benefit.

The Empowered Institution sanctions projects for VGF

upto INR100 crore (USD 20 million) for each eligible

project subject to the budgetary ceiling indicated by

the Finance Ministry. The Empowered Institution also

considers other proposals and places them before the

Empowered Committee. Funding upto 20% of the

project cost is provided. If required, an additional 20%

can be made available by the sponsoring

Ministry/agency.

Proposals up to INR 200 Crore (USD 40 million) will be

sanctioned by the Empowered Committee and

amounts exceeding INR 200 Crore will be sanctioned

by the Empowered Committee with the approval of

Finance Minister.

Capital grant for all infrastructure projects under the

VGF scheme is restricted to a maximum of 40% of the

project cost (for projects upwards of INR 200 Crore).

Grant provided by NHAI for highway projects under

the BOT route may be financed through the VGF route.

VGF funding will not be available over and above

NHAI's grant for projects.

The Government will carry out all preparatory works

for the projects identified for private investment and

meet the cost of following items:

• Detailed Feasibility Study



Government Support for Major Clearances required for Road Projects

Cost Estimate

Techno economic Clearances

Pollution Clearance (water & air)

Forest Clearance

Environmental Clearance

Company Registration

Rehabilitation & Resettlement of Displaced

families

CLEARANCES

Ministry of Road Transport & Highways /Public Works Department /National Highways Authority of India (NHAI)

Ministry of Road Transport & Highways/ Public Works Department/ National Highways Authority of India

Central Pollution Control Board

Ministry of Environment & Forests

Ministry of Environment & Forests

Registrar of Companies

Ministry of Road Transport & Highways, State Governments and NHAI

CLEARING AUTHORITY

• Land for right-of-way and enroute facilities

• Clearance of the right-of-way land: Relocation of

utility services, cutting of trees, resettlement and

rehabilitation of the affected establishments

• Environment Clearances

• Clearance from Indian Railways to allow

construction of Rail-Over-Bridges under their

supervision.

• Where design is left to the enterprise, giving

details of standards and bore holes logs at bridge

sites etc.

Foreign Direct Investment (FDI) Policy

Source: RBI

Foreign Investment (in billion $)

Direct Foreign Investment

Portfolio Foreign Investment

5

1

2002-03 2003-04

4.3

11.4

6

9.3

2004-05 2005-06 2006-07 2007-08

7.7

12.5

8.57.1

15.5

29.3

Routes For Foreign Direct Investment

Introduction

The FDI regime has been progressively liberalised

during the course of the 1990s (particularly after 1996)

with most restrictions on foreign investment being

removed and procedures simplified. With limited

exceptions, foreigners can invest directly in India,

either wholly by themselves or as a joint venture.

India welcomes FDI in virtually all sectors, except

those of strategic concern such as defence (opened to

a limited extent), atomic energy and activities/ sectors

not opened to private sector investment.

The major source of FDI in India is through the equity

route, which accounted for 81% of the total FDI

inflows in India. Reinvested earnings of FDI

companies accounted for 18% of the total Direct

Investment. Acquisitions accounted for 17% of total

FDI.


Investment Climate – FDI Current Situation

Automatic RouteNo prior government approval required

FDI equity limit-Automatic Route (illustrative list)• Roads -100% • Insurance – 26%• Domestic airlines – 49% (100% for NRI investment)• Telecom services – Foreign equity 49%• Private sector banks – 74%• Exploration and mining of coal, lignite, diamonds and

precious stones – 100%• Development of new airports – 100%• Development of existing airports – 74%• Trading -whole sale cash & carry & for exports – 100%

Other areas (100% - Auto Route): Pharma, Non Banking Financial Services, SEZs, Food Processing

Prior Permission (Foreign Investment Promotion Board)

Decision generally within 4–6 weeks

FDI requiring prior approval (illustrative list)• Defence production – 26%• FM broadcasting – Foreign equity 20%• News and current affairs – 26%• Broadcasting – cable, DTH, setting up of hardware facilities

– Foreign equity 49%• Test marketing – 100%• Single Brand Retailing – 51%

FDI in

•

•

Automatic Route - No prior Government approval

is required if the investment to be made falls

within the sectoral caps specified for the listed

activities. Only filings have to be made by the

Indian company with the concerned regional

office of the Reserve Bank of India (“RBI”) within

30 days of receipt of remittance and within 30 days

of issuance of shares

FIPB Route - Investment proposals falling outside

the automatic route would require prior

Government approval. Foreign Investment

requiring Government approvals are considered

and approved by the Foreign Investment

Promotion Board (“FIPB”). Decision of the FIPB is

usually conveyed in 4-6 weeks. Thereafter, filings

have to be made by the Indian company with the

RBI

• CCFI Route - Investment proposals falling outside

the Automatic Route and having a project cost of

INR 6,000 million (USD 120 million) or more would

require prior approval of Cabinet Committee of

Foreign Investment (“CCFI”) after obtaining the

FIPB approval. Decision of CCFI is usually

conveyed in 8-10 weeks. Thereafter, filings have to

be made by the Indian company with the RBI.

Investment proposals falling within the automatic

route and having a project cost of INR 6,000

million or more do not require to be approved by

CCFI

• Taxed at worldwide income

• Taxed at 30%

• If taxable income >INR

10,000,000; Surcharge

applicable @ 10% of tax

(surcharge @ 7.5%

proposed by budget 2010

from AY 2011-2012).

• Education cess of 3% of

tax (and surcharge if

applicable)

• Dividend Distribution Tax

(DDT) is levied @ 16.995%

(16.609% proposed by

Budget 2010 from AY 2011-

12) on the amount of

dividend declared.

• Taxed at income which is

earned from a business

connection in India or from

a source/asset located in

India.

• Taxed at 40%

• If taxable income > INR

10,000,000; Surcharge

applicable @ 2.5% of tax.

• Education cess of 3% of

tax (and surcharge if

applicable)

• No Dividend Distribution

Tax (DDT)

Foreign CompaniesDomestic Companies

Tax Environment


Personal Income Tax

Corporate Tax

Customs Duty

Taxation System In India

India has a well-developed tax structure with the

authority to levy taxes divided between the central

and the state governments. Since 1991 tax system in

India has undergone a radical change in line with

liberal economic policy. Brief description of taxes

prevalent in India is given below:

Direct Taxation

Tax incentive for Roads

100% tax holiday is available for those who are

engaged in development of roads and highways. Such

tax holiday can be availed for any consecutive period of

10 years within a block of 20 years starting from the

year when the person starts developing the

roads/highways. Following conditions needs to be

fulfilled by such person:

• There should be a company registered in India;

• Such company is awarded a contract by the

government or its agency to develop the

roads/highways;

• A certificate from an accountant certifying the

deduction.

Both the companies may be liable to Minimum Alternate Tax (MAT) of 15%

(18% proposed by Budget 2010 from AY 2011-12) of the book profits if the tax

liability under normal provisions is less than MAT. The above rates may be

subject to more beneficial provisions contained in a tax treaty entered into

between India and the country in which the taxpayer is resident.

The tax law requires companies to pay a minimum tax

known as MAT on the basis of profits disclosed in the

financial statements. MAT becomes payable when tax

liability under normal provisions is less than MAT. In

such a case, companies are liable to pay 15% of book

profits as MAT plus applicable surcharge of 10% for

domestic companies (surcharge of 7.5% proposed by

Budget 2010 for domestic companies from AY 2011-

2012) and 2.5% for foreign companies. Education cess

of 3% thereon is levied in case of both domestic and

foreign companies. Book profits for this purpose

Minimum Alternate Tax (MAT)

Rates of Taxation

Taxation in India

Central

Service Tax

OctroiCentral Sales Tax

Entry TaxExcise DutyWealth Tax

Value Added TaxProfessional Tax

Indirect TaxOther TaxesIndirect TaxesDirect Taxes

State

are computed by making prescribed adjustments to

the net profit disclosed by the corporations in

their financial statements. Budget 2010 has proposed

a MAT rate of 18% from AY 2011-2012.

MAT paid by companies can be carried forward for 10

years and offset against income tax payable under the

normal provisions of tax. The maximum amount that

can be set off against regular income tax is equal to the

difference between the tax payable on the total

income as computed under the Income Tax Act and

the tax that would have been payable under the MAT

provisions for that year.

Dividend distributed by an Indian company is exempt

from income-tax in the hands of all shareholders.

Dividend Distribution Tax (DDT)

However, the Indian company is liable to pay a tax

called Dividend Distribution Tax (DDT) of 16.995%

(16.609% proposed by Budget 2010 from AY 2011-12)

(i.e. inclusive of surcharge and education cess) on such

dividends. This tax is in addition to the normal

corporate tax liability (income tax levied on the

company). The amount of dividend declared by the

parent company (i.e. holding more than 50 percent of

capital) will be reduced by the amount of dividend

received from its subsidiary company for the purposes

of computing DDT payable by the parent company if:

• Such dividend is received from its subsidiary;

• The subsidiary has paid DDT on such dividend; and

• The parent company is not a subsidiary of any

other company.

Such tax paid is a non-deductible expense.


Profit / Loss as per

Accounts

Add: Expenses Disallowed as per Income Tax Act and

considered in accounts

Less: Expenses Allowed as per Income Tax Act but not considered in accounts

Apply applicable tax rates (including Surcharge & Education

Cess) to the taxable income to arrive at gross tax payable under

normal provisions.

Tax payable is equal to tax under normal provisions

Calculated tax payable under ‘Minimum alternate

Tax’ (MAT) provisions

Is Tax payable under normal

provisions higher than tax payable

under MAT?

Deduct taxes already paid to arrive at net taxes payable /

refundable

Is amount positive?

Net taxes refundable

Tax payable is equal to tax under MAT provisions

Y

N

Y

N

Net taxes payableProfit / Loss

as per Accounts

Add: Expenses Disallowed as per Income Tax Act and

considered in accounts

Less: Expenses Allowed as per Income Tax Act but not considered in accounts

Apply applicable tax rates (including Surcharge & Education

Cess) to the taxable income to arrive at gross tax payable under

normal provisions.

Tax payable is equal to tax under normal provisions

Calculated tax payable under ‘Minimum alternate

Tax’ (MAT) provisions

Is Tax payable under normal

provisions higher than tax payable

under MAT?

Deduct taxes already paid to arrive at net taxes payable /

refundable

Is amount positive?

Net taxes refundable

Tax payable is equal to tax under MAT provisions

Y

N

Y

N

Net taxes payable

Determination of Taxable Income

Withholding tax compliance

Tax withholding and deposit

• Tax on payment is required to be deducted at the time of

credit; or at the time of payment, whichever is earlier.

• Amount of tax withheld is required to be deposited with the

government within 7 days from the end of the month in which

tax was withheld.

• In case the tax is deducted on 31 March, the same can be

deposited by 31 May.

Requisite Challan

• Tax withheld has to be deposited in Form ITNS-281. With

effect from 1 April 2008, all corporate will have to pay tax

electronically.

Withholding tax certificate

• Certificate in Form no. 16A to be issued to the payee within 1

month of from the end of the month in which the tax was

withheld (certain exceptions)

• Certificate in Form 16 for tax withheld on salary to be issued

within 1 month from the end of the financial year

Quarterly statement

• Payment to residents: Quarterly statements for withholding tax

are to be filed on or before July 15, October 15, Jan 15 and June

15.

• Payment to non-residents: Quarterly statements for

withholding tax is to be filed on or before July 14, October 14,

Jan 14 and June 14*

* Introduced by Income Tax (First Amendment) Rules 2010

released on 18 February 2010 w.e.f 1st April 2009

Withholding tax



List of countries with which India has a DTAA

Double Tax Relief and Tax Treaties

India has a comprehensive tax treaty network. Taxpayers have the option to choose between the provisions

of the tax treaty or the Income Tax Act, whichever is beneficial to them. List of countries with which India has

a Double Taxation Avoidance Agreements (DTAA)

Armenia

Australia

Austria

Bangladesh

Belarus

Belgium

Botswana

Brazil

Bulgaria

Canada

China

Cyprus

Czech Republic

Denmark

Egypt

Finland

France

Germany

Greece

Hungary

Iceland

Indonesia

Ireland

Israel

Italy

Japan

Jordan

Kazakhstan

Kenya

Korea

Kuwait

Kyrgyz Republic

Libya

Malaysia

Malta

Mauritius

Myanmar

Mongolia

Morocco

Namibia

Nepal

Netherlands

New Zealand

Norway

Oman

Philippines

Poland

Qatar

Romania

Russia

Saudi Arabia

Serbia

Singapore

Slovenia

South Africa

Spain

Sri Lanka

Sudan

Sweden

Syria

Tanzania

Thailand

Turkey

Turkmenistan

Tazakhistan

UAE

Uganda

UK

Ukraine

USA

Uzbekistan

Vietnam

Zambia

PortugueseRepublic

Swiss Confederation

Trinidad & Tobago

Incentives/Exemptions

• Exemption for specified projects: An importer

of specified goods is eligible to claim exemption 16from payment of Customs duty on fulfillment of

prescribed conditions including:

i The goods are imported by Ministry of

Surface Transport or a person who has been

awarded contract for construction of roads in

India by NHAI, PWD, road construction

corporation under the control of State/ Union

Territory Government

ii A person who has been named as a sub-

contractor in the contract between NHAI and

the principal contractor for construction of

roads

• Project Import: As per the project import

regulations, the benefit under project import

would be available only to those goods which are

imported against the specific contracts registered

with the appropriate authority. Under Project

Import scheme, goods can be imported for

specified projects (including road development

project for NHAI) at a concessional BCD rate of

5%. An importer of specified goods is eligible to

claim exemption from payment of Customs duty

on fulfillment of prescribed conditions.

• Projects funded by international organisations:

In terms of customs laws, goods imported from

outside India for execution of projects funded by

international organisations (like World Bank, Asian

Development Bank etc.) and approved by the

Government of India are exempt from levy of

Customs duty subject to prescribed conditions.

• Foreign Trade Policy ('FTP'): The FTP provides

certain exemptions/benefits to specified supplies

of such goods manufactured in India, where such

supplies qualify as 'Deemed Exports'. As per the

FTP, Deemed Exports refer to certain transactions

wherein the goods supplied do not leave the

country and payment for supplies is received in

Indian rupees or in free foreign exchange. Supplies

made to various specified projects/ purposes

qualify as deemed exports under the FTP including

supplies under the following categories:

i. Supply of goods to projects financed by

multilateral or bilateral agencies/funds

notified by Department of Economic Affairs

under International Competitive Bidding

('ICB').

ii. Supply of goods to any project or purpose in

respect of which import of goods is

permissible at zero-rate of Customs duty.

However, in order to be eligible for Deemed Export

benefits, supplies under the aforementioned

categories should be made under ICB. Further, a sub-

contractor making supplies directly to the main

contractor or directly to the designated projects/

agencies would also be eligible for Deemed Export

benefits subject to prescribed conditions in this

regard.

Excise duty is levied by the Central Government on the

manufacture of movable goods in India at the time of

Excise duty

Indirect Taxation

Customs Duty

Customs duty is payable on import of goods into India.

The rate of Customs duty is based on the Tariff

classification of the goods being imported as per the

Customs Tariff Act, 1975 ('Customs Tariff') [which is

aligned with the Harmonised System of Nomenclature

(HSN) followed internationally].

Various concessions/ exemptions are available on the

basis of nature of goods, usage, status of importer,

country of import etc.

15. Capital goods can be imported at the general rate of 7.5 %

16. Notification No. 21/2002-Cus, dated 1 March 2002


Education Cess (including the Secondary Higher Education Cess of One percent)

1510%

8.24%*

3%

4%

Name of Duty / Cess Rate

Basic Customs Duty ('BCD')

Additional Customs Duty in lieu of Excise duty ('CVD')

Additional duty of Customs in lieu of local taxes ('ADC')

*10.3% proposed by Budget 2010 applicable from 26 February 2010

removal of goods from the factory premise of the

manufacturer. The Central Excise Act, 1944 ('the

Excise Act') prescribes the rate of levy in the Excise

Tariff Act, 1985 ('Excise Tariff'). The general rate of

Excise duty in India is 8.24% (10.3% proposed by

Budget 2010 applicable from 26 February 2010 [Basic

Excise Duty 10%, Education Cess 3%]). Credit of

Excise duty paid is available against the output Excise

duty liability/output service tax liability.

A supplier or a manufacturer of goods (that are

supplied to a contractor/ sub-contractor engaged in

construction activities) would be eligible for exemption

from payment of Excise duty if following conditions

are fulfilled:

• Goods are supplied against ICB

• Goods being supplied/ manufactured are exempt

from BCD, CVD and ADC when imported into India

Also, all goods supplied to projects financed by

international organisations (like World Bank, Asian

Development Bank etc.) and approved by the

Government of India are exempt from levy of Excise

duty.

Service tax is a federal levy on provision of specified

services in India. Service tax is currently leviable at the

rate of 10.3%. Relevant taxable services category for

construction activities include:

• Commercial or industrial construction services

• Site format ion, c learance, excavat ion,

earthmoving and demolition services

• Works contract services

• Management, maintenance or repair services

Construction/maintenance of roads have been

specifically exempted from levy of Service tax under

the following taxable categories:

• Commercial or industrial construction services

• Site formation and clearance, excavation, 17earthmoving and demolition services

• Works contract services

• Management, maintenance or repair services



Service Tax

Value Added tax ('VAT')

Central Sales Tax ('CST')

Goods and Service tax - Proposed

VAT is a state specific levy on sale of goods within the

State. The rate of VAT varies from 4%/ 12.5%

(depending upon the goods involved). However, a

higher or a lower rate of VAT may be notified by the

respective State Government for specified goods.

Multiple schemes for payment of VAT are available

under the State VAT laws.

A transaction qualifies as an inter-state sale, where the

sale entails movement of goods from one State to

another. Inter-state movement of goods is liable to

CST under the Central Sales Tax Act, 1956 ('the CST

Act') at the rate of 2 percent against statutory

declaration form ('Form C'), which can be issued by

the buyer for specified purposes, or at the VAT rate

applicable on local sale of goods in the dispatching

State (i.e. the State from which the movement of

goods commences pursuant to the sale). The EPC

contractor can issue Form 'C' for purchase of goods at

the concessional rate.

Further, it is pertinent to note that the CST borne on

account of inter-state procurements and paid in other

State will not be available as credit against any output

liability.

In the Union Budget 2008-09, the Government of India

has signaled its intention to introduce a nation wide

Goods and Service tax ('GST') with effect from 1 April

2010. GST is now slated to be introduced with effect

from 1 April 2011. GST would be in lieu of Excise duty,

VAT, Entry tax, CST and Service tax.

GST in India would be a dual GST with Center (CGST)

and State (SGST) levying GST at each transaction.

Inter-state transactions would attract integrated GST

(IGST) which would be the sum of CGST and SGST.

Credit of CGST, SGST and IGST would be available. No

credit of Central GST is likely to be available against

State GST and vice-versa.

17. Notification No. 17/2005-ST, dated 7 June 2005


Repatriation of Investments and Profits Earned in India


Dividends are not allowed as deduction. Royalty/ fee for technical services/ interest are allowed as

deduction subject to transfer pricing norms

• Royalties and Technical Know-how Fees:

Indian companies that enter into Technology

Transfer Agreements with foreign companies are

permitted to remit payments towards know-how

and royalty under the terms of the foreign

collaboration agreement, subject to limits.

• Dividends: Dividends are freely repatriable after

the payment of Dividend Distribution Tax by the

Indian company declaring the dividend. No

permission of RBI is necessary for effecting

remittance, subject to specified compliances.

• Interest: Payment of interest borrowed from

overseas would be governed by the regulation

regarding external commercial borrowings.

• Buyback of shares: A maximum of 25% of

equity share capital permitted to be repurchased

in a financial year. Buyback is possible only from

free reserves, share premium and proceeds

Rates oftaxation

Type of Income streams

Interest Dividend Royalty

Domestic law (a) NIL

Best treaty rate 5%

Domestic law21.115%

Domestic law10.56%

Domestic law10.56%

Best treaty rate 10%

Best treaty rate 10%

Best treaty rate Nil

Notes:

a. Tax free for all shareholders but Indian company declaring the dividend is subject to Dividend Distribution Tax

(DDT) at 16.995% of the dividend declared

Ministry of Commerce and Industry vide Press Release dated 5 November 2009 has permitted payments for

Royalty, lumpsum fee for transfer of technology, payments for use of Trade mark/ brand name under automatic

route.

Technical Fees

from fresh issue of shares. Post repurchase, debt

owed by company should not to exceed 2 times

of (capital + free reserves). There will be no tax

implication in the hands of Indian company.

However, since buy back is considered as

transfer of shares (capital asset), therefore,

shareholder will be liable to capital gain tax. No

DDT to be paid by Indian company/ shareholders.

• Foreign

capital invested in India is generally repatriable,

along with capital appreciation, if any, after the

payment of taxes due on them, provided the

investment was on repatriation basis. Preference

shares are similar to equity shares carrying

preferential right towards payment of dividend.

Profits on redemption of preference shares

taxed are to be taxed as capital gains. This may

not be applicable for non-resident investors as

preference shares can be redeemed only at par.

DDT @ 16.995% (16.609% proposed by Budget

2010 from AY 2011-12) would be payable on

coupon on preference shares.

Redemption of preference shares:

Repatriation of capital

Redemption of preference share

Liquidation of companyBuy back of shares Capital Reduction

• The company law provision

provides for a detailed procedure wherein the

capital of company can be reduced and money

can be repa t r i a ted back . A spec ia l

permission/resolution is to be passed at general

meeting of shareholders authorising capital

reduction process. Thereafter, a capital reduction

process has to go through a court process which

would could involve obtaining creditors approval,

no objection certificate from all creditors etc.

Cash paid to the extent of accumulated profits

(including capitalised profits) would be liable to

DDT @16.995% (16.609% proposed by Budget

2010 from AY 2011-12) in the hands of Indian

company.

• Cash can be

repatriated by way of liquidation of Indian

company. Both the shareholders can exit out of

the project simultaneously and get entire funds

back. Liquidation is complicated and time

consuming.

Capital reduction:

Liquidation of company:


Administrative Framework

The road sector in India is a concurrent subject. The

jurisdiction of Central Government is limited to

National Highways, while the jurisdiction of State

Governments is across State Highways, Major District

Roads, Village Roads and Other Roads. At the Central

Level, the overall policy, programme development and

planning is done by the Planning Commission in

consultation with the Ministry of Road Transport and

Highways (MoRTH) and Ministry of Rural

Development (MoRD).

At the State Level, the overall policy and programme

development and resource planning is done by the

State Planning Cell in consultation with Central

Planning Commission and State Ministry in charge of

Roads.

Administrative Framework by Category of Roads

Road Network Coordinating Agency Connectivity To

Expressways

National Highways

Ministry of Road Transport and

Highways (MoRTH), National Highway

Authority of India (NHAI) and State Road

Development Corporations

MoRTH, NHAI, BRO

(Border Roads Organisation)

State capitals and tier 1 cities

Union capital, state capitals, major ports,

strategic locations

State Highways

Major District Roads

State Public Works Departments ( PWDs)

State PWDs

State capitals, district centres, important

towns, national highways, other states

State Capitals, district centres,

important towns, national highways

Production centres, markets, highways,

railway stations etcRural and Other Roads Ministry of Rural Development (MoRD)

Projects like irrigation, power, mines, etc Project Roads State PWDs/Project Organisations

Intra city networkingUrban Roads Municipal Corporations

Villages, district roads, highways,

railway stations, riversides etc Village Roads Zilla Parishads/State Governments



Administrative Framework for Roads

MoRTH

(allocation of funds for the development and maintenance of highways)

MoRD (allocation of funds for the development

and maintenance of rural roads )

Road Development Corporations (Construction, Maintenance and

Operation of Roads)

Planning, Policy and Budgeting

NHAI (NHDP implementation,

operations and maintenance)

Department of Road Transport & Highways

Institutional Advisory Framework

Facilitated by

Committee on Infrastructure

Planning Commission

Finance Ministry/PPP Cell Central Level

Secretary Panchayat Raj

Rural Redevelopment & Panchayat Raj

(Rural Roads)

State PWDState Highways

MDRs,ODRs, Village Roads

State PWD(NH-Wing)

State Level

About NHAI

The National Highways Authority of India (

constituted by an Act of Parliament, the National

Highways Authority of India Act, 1988. The Authority

was operationalised in Feb, 1995.

NHAI is the nodal agency responsible for the

development, maintenance and management of

National Highways entrusted to it and for matters

connected or incidental thereto. The USD 60 billion

National Highways Development Project (NHDP) has

been entirely managed by the NHAI under the

mandate of the Ministry of Road Transport &

Highways (MoRTH), Government of India.

The charter of NHAI is set out in the National

Highways Act, 1956 and National Highways Authority

of India Act, 1988:

Delegation of powers and functions of the

highway administration to NHAI

Enhanced powers for land acquisition

Right to collect tolls for road projects on its own or

through third parties in accordance with specified

government guidelines

Authorisation to borrow from capital market

through bonds, debentures and other instruments

Situation where Central Government will have

powers to override NHAI and its officials

NHAI) was

•

•

•

•

•

Besides implementation of the NHDP, NHAI is also

concerned with implementation of road safety

measures and environmental management and IT

initiatives in construction, maintenance and operation

of National Highways.

For projects related information kindly contact :

General Manager (Finance)

Phone : + 91(011)-25074100 & 25074200, Extn : 1418


Organisation Structure of NHAI is set out below:


NHAI

Technical Finance Administration

Project Management

Corridor Management

NH

AI

CO

RP

OR

AT

E

OF

FIC

E

NH

AI

FIE

LD

OF

FIC

ES

The administrative framework at the Head Office is set out below

Chairman

Corridor Management Unit (CMU)

Project Implementation Unit (PIU)

CGM (Technical)-

(2) & (3)CGM (PQ) CGM (S R&D)

CGM (Safety)

CGM (HR &

Admn)

CGM (LA)

CGM (IT)

CGM (CM)

CGM (Legal)

CGM (Finance)

Member Administration

Member

Technical (1)

Member

Technical (2) &(3) Member Finance

Member

PPP

Central Vigilance Officer

Annexure

List of CD Contents

1. Overview of the Model Concession Agreement (BOT-Toll)

2. Model document of Request for Qualification

3. Model document of Request for Proposal

4. Arbitration Act, 1996

5. Central Road Fund Act

6. Land Acquisition Act

7. The Indian Tolls Act

8. New National Highways Fee Rules

9. Motor Vehicles Act

10. NHAI Act, 1988

11. Environment Protection Act

12. Manual and Specification for 6-laning



15. Road Transport Policy

16. Reserve Bank of India Policy

17. Soft copy of the Brochure


Useful Addresses

Registrar of Companies

Department of Company Affairs

Ministry of Finance

'B' Block, IInd Floor, Paryavaran Bhawan

C.G.O. Complex, New Delhi-110 003, India

www.dca.nic.in

Border Roads Organisation

Seema Sadak Bhawan

Ring Road Naraina

Delhi Cantt 110010

www.bro.nic.in

Central Institute of Road Transport

Bhosari, Pune - 411026, India

www.cirtindia.com

National Portal of India

www.india.gov.in/

Directory of Indian Government Websites

www.goidirectory.nic.in/

Press Information Bureau (PIB)

www.pib.nic.in/

National Highways Authority of India

G 5&6, Sector-10, Dwarka,

New Delhi - 110 075

Phone: 91-011-25074100 & 25074200

Fax : 91-011-25093507, 25093514

www.nhai.org

Ministry of Finance, Government of India /

Department of Economic Affairs

North Block, New Delhi

www.finmin.in

Department of Road Transport and Highways

Transport Bhavan

1, Parliament Street

New Delhi 110 001

www.morth.nic.in

Department of Industrial Policy and Promotion

Joint Secretary

Secretariat for Industrial Assistance (SIA)

Ministry of Commerce & Industry

Udyog Bhavan, New Delhi-110 011, India

www.dipp.nic.in

Reserve Bank of India (RBI)

Foreign Investment Division,

Shaheed Bhagat Singh Road,

Mumbai-400 001, India

www.rbi.org.in

Foreign Investment Promotion Board

Ministry of Finance

Government of India

North Block, Lok Nayak Bhavan,

New Delhi

Not just roads... building a NATION

http://www.nhai.org