October 10, 2011
The
Union road transport ministry is finding it difficult to adopt a viable
economic model for access-controlled expressways. The current cost estimates
have shot up to Rs 45-50 crore per km against Rs 10 crore a km needed for six
lane highways.
With
such a huge investment requirement, the ministry is unsure if the build operate
transfer (BOT) model for public private partnership projects (PPP) is viable.
If the BOT model is adopted, the toll fees will have to be kept very high to
recover the cost over a 30 year period. “State and national highways with lower
toll would entice more people to use them,” a senior government official said.
The
ministry has drafted a plan to construct 15,600 km of expressways by 2022 and
has identified over 40 stretches for the same. The idea is to create an Indian
National Expressway Network by the 13th Five Year Plan. The plan is to cover
special economic zones (SEZs), industrial corridors, industrial towns and
densely populated cities to raise the average distance travelled by a vehicle
from 300 km per day to almost 600-800 km a day.
The
BOT annuity model, where the government pays annually or bi-annually to
compensate the private developers, also appears to be unviable, say officials.
The reason is that such high cost of construction will entail huge public
expenditure while there are other competing sectors in the economy which are
vying for same allocations.
“The
third model before us is the engineering procurement construction (EPC). Which
is not an option here as that would again imply a huge burden on the
government’s exchequer,” the official pointed out.
In
developed countries, the first 50-100 km of expressways are built by the
government to attract private developer. Once traffic picks up on the route,
the developers build the remaining length of the expressway and is allowed to
charge toll on the entire length (including the stretch constructed by the
government).
The
government allows this as an added incentive towards recovering the cost of
construction and reaching the targeted internal rate of return.
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