Government of India

Ministry of Shipping, Road Transport and Highways

Guidelines for Investment in

Road Sector

Not just roads... building a NATION

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

Policy Framework 30

Foreign Direct Investment Policy 32

Tax Environment 34

Repatriation of Investments
and Profits Earned in India 40

Administrative Framework 42

About NHAI 44

Annexure 46

KPMG in India
for
National Highways Authority of 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.
4 Guidelines for Investment in Road Sector
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
Crore (USD 60 billion1) 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
1. INR 50 = 1 USD : figures approximated
2. Design Build Finance Operate & Transfer
(DBFOT)
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
BOT/DBFOT2-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.

Current Scenario
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 66,590 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
3. CRISIL Research
Guidelines for Investment in Road Sector 5
project IRR is expected to be around 14-16% and
equity IRR around 18-20%3.
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.
6 Guidelines for Investment in Road Sector
Upgradation of 12,109 km (NHDP-III)
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 16.1 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.
2-laning of 20,000 km with paved shoulders (NHDP-IV)
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).
6-laning of 6,500 km (NHDP-V)
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
40000
Current Status of NHDP4
35000
30000
25000
20000
15000
10912
10000
6175
5000
0
Completed Work in Progress
4. As on 31st March, 2009.
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.
Development of 1,000 km of expressways (NHDP-VI)
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.
Other Highway Projects of 700 km (NHDP-VII)
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.
33505
16418
To be Awarded Total
 Guidelines for Investment in Road Sector 7

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

Awarded Awarded Completed

Category
No. of Contracts Length in km Cost (INR Crore) No. of Contracts Length in km
World Bank Funded Projects

NHDP Phase I 18 983 5538 12 616

GQ 18 983 5538 12 616
Others - - - - -

NHDP Phase II EW Corridors 12 482 3208 - -

Sub-Total A 30 1465 8746 12 616

ADB Funded Projects

NHDP Phase I 13 766 2436 10 616

GQ 12 718 2377 9 568
Others 1 48 59 1 48
NHDP Phase II NS & EW Corridors 31 1636 7565 5 365
Sub-Total B 44 2402 10001 15 981
JBIC Funded Projects

NHDP Phase I 7 150 634 7 150

GQ 5 111 333 5 111
Others 2 39 301 2 39
Sub-Total C 7 150 634 7 150
Grand Total (A+B+C) 81 4017 19381 34 1747
8 Guidelines for Investment in Road Sector

Presently, the development and maintenance of (Annuity ) - Investment by private firm and
National Highways is financed by following modes: return through semi-annual payments from
1. Government's general budgetary sources NHAI as per bid.
• Special Purpose Vehicle – SPV (with equity
2. Dedicated accruals under the Central Road Fund participation by NHAI)
(by levy of cess on fuel) • Market Borrowings
3. Lending by international institutions:
• World Bank NHAI also has a provision for providing grant upto 40%
• ADB of the project cost to make projects commercially
• JBIC viable. However, the quantum of grant is decided on a
4. Private financing under PPP frameworks case to case basis and typically constitutes the bid
• Build Operate and Transfer/Design Build parameter in BOT projects generally not viable based
Finance Operate and Transfer5 (DBFOT) - on toll revenues alone. The disbursement of such
Investment by private firm and return through grant is subject to provisions of the project concession
levy and retention of user fee agreements (please refer CD for provisions in the
• Build Operate and Transfer (Annuity) - BOT Model Concession Agreement).

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

Phase Particulars Projected For (Kms) INR Crore

Cess and Market Borrowings 18,846

NHDP-I External Assistance 7862
BOT/SPV 3592
Total (At 1999 Prices) 7498 30300
Cess and Market Borrowings 23420
NHDP-II External Assistance 7609
BOT/SPV 3310
Total (At 2002 Prices) 6647 34339
Budgetary Support 12809
NHDP-III Cess and Market Borrowings 17688
BOT/SPV 50129
Total (At 2004 Prices) 12109 80626
Private Sector 4608
NHDP-IV A
Government Spending 2342
Total (At 2006 Prices) 5000 6950
Cess and Market Borrowings 5519
NHDP-V
BOT/SPV 35691
Total (At 2006 Prices) 6500 41210
Cess and Market Borrowings 7680
NHDP-VI
BOT/SPV 9000
Total (At 2006 Prices) 1000 16680
Cess and Market Borrowings 6302
NHDP-VII
BOT/SPV 10378
Total (At 2007 Prices) 700 16680

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 .
 Guidelines for Investment in Road Sector 9

NHAI projects, with higher traffic volumes, have also been bid out on Negative Grant. 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.

Projects awarded on Negative Grant

Estimated Estimated
Grant Grant
Road Section Length (Km.) Cost Cost
(INR Crore) (USD Million)
(INR Crore) (USD Million)

Delhi-Gurgaon 28 710 169 61 12

Rajkot Bypass-Jetpur 36 388 92 59 12

Panipat elevated Highways 10 270 64 96 19

Salem- Karur 42 253 60 46 9

Krishnagiri - Thopurghat 62 372 89 140 28

Tindivanam-Ulundurpet 71 480 114 152 30

Thirssur-Angamali 40 312 74 84 17

Jalandhar- Amritsar 49 263 63 7 1

Ambala-Zirakpur 36 298 71 106 21

Dhule-Pimpalgaon 118 556 132 59 12

Vadodara Bharuch 83 660 157 471 94

Bharuch-Surat 65 492 117 504 101

Projects awarded on Revenue Share Basis

Estimated Estimated
Road Section Length (Km.) Cost Cost Revenue Share (%)
(INR Crore) (USD Million)

Surat-Dahisar 239 2600 619 38%

Gurgaon-Jaipur 225 1900 452 48%

Panipat-Jalandhar 291 2200 523 20%

Chennai-Tada 42 317 76 17%

Vijayawada-Chilkaluripet 85 1173 280 2%

10 Guidelines for Investment in Road Sector
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 a long
term Operations, Maintenance and Transfer (OMT)
concession.
BOT (Toll)
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.
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).
BOT (Annuity)
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
linked to performance covenants. The concessionaire
does not bear the traffic/ tolling risk in these contracts.
Operate, Maintain and Transfer (OMT) Concession
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).
Special Purpose Vehicle for Port Connectivity
Projects
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.
International Competitive Bidding Process
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
similar projects which meets the minimum criteria set
out in the RFQ Document. The current process of pre-
 Guidelines for Investment in Road Sector 11

qualification shortlists the top 6 applicants6 with

Roads
highest technical score, based on the pre-qualification
criteria. Notice inviting tenders is posted on the web
site and published in leading newspapers. Development
Construction Tolling
Urban
Trucking Tourism
Projects Transportation

Stage 2: Commercial bids from pre-qualified bidders Pvt Bus Luxury

BOT - Toll Equipment Services Perishables
Service Buses
are invited through issue of RFP. Generally, the
duration between Stage 1 and 2 is about 30-45 days. BOT -
Material Equipment
Annuity Containers
Wide publicity is given to NHAI tenders so as to attract
OMT
attention of leading contractors/ developers/ Technology
Bulk

consultants. SPV

Maintenance

The Government has put in place appropriate policy, Logistics & Services
institutional and regulatory mechanisms including a
set of fiscal and financial incentives to encourage Infrastructure Development
increased private sector participation in road sector.

Opportunities for Private Investors/ Developers

Model Concession Agreement (MCA) for PPP
More than 60% of the projected investment
Projects
requirement for the NHDP (USD 60 billion) is expected
The highways sector in India has witnessed significant
to be privately financed, primarily through the
investment in recent years. For sustaining the interest
BOT/DBFOT (Toll) route, offering enormous
of private participants, a clear risk-sharing and
opportunities. With a large number of new projects on
regulatory framework has been spelt out in the Model
offer under PPP in the road sector, there exists several
Concession Agreement (MCA). The MCA has been
investment opportunities for investors and companies
developed to facilitate speedy award of contracts. This
with diverse business lines such as engineering
framework has been successfully used for award of
companies, civil work contractors, O&M contractors,
BOT concessions. The MCA has been revised recently
toll operators, construction equipment manufacturers
and current projects are being awarded under the
etc. and other stakeholders such as advisors,
revised MCA. This framework addresses the issues,
financiers and sector professionals. Only about 15 per
which are typically important for PPP, such as
cent of the total highways in India are 4-laned and the
unbundling of risks and rewards, symmetry of
sheer potential for investments in this sector is likely
obligations between the principal parties, equitable
to create opportunities in the core construction
sharing of costs and obligations, and risk mitigation
industry which may also be attractive for foreign
options under various scenarios including force
players.
majeure and termination, under transparent and fair
procedures.
The opportunity for private players in the road sector
can be broadly categorised in two segments:
With the introduction of the MCA, the risks involved in
a) Infrastructure Development
project and contractual issues, hitherto, have been
b) Logistics and Services.
assuaged, and the entire process from invitation to bid
to implementation of the project is transparent.
MCA's risk framework is briefly discussed below:

6. This may be subject to change pending review of the competent authority

12 Guidelines for Investment in Road Sector
Risk Framework of Model Concession Agreement
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.
Key Concessionaire Risk/Obligations
• Construction Risk - 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.
• O & M 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.
• Financial Risk - 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.
• Traffic Risk - 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
agreement, which is usually around the 10th 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.
Key NHAI Risk/Obligations
• Land Acquisition Risk: NHAI is responsible for
acquiring the requisite land for the project highway
• Approvals: NHAI will provide all reasonable
support and assistance to the concessionaire in
procuring applicable permits required from any
Government Instrumentality.
Key Common Risk
• Force Majeure Risk - 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:
Non-Political Event:
• act of God, epidemic, extremely adverse
weather conditions or radioactive contamination
or ionising radiation, fire or explosion;
• strikes or boycotts

• 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.
Indirect Political Event
• 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
Political Event
• 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
Guidelines for Investment in Road Sector 13
Salient features of the MCA
• 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
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.
14 Guidelines for Investment in Road Sector

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

way of equity support and operations &
maintenance support in quarterly installments.
• 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.

Implementation steps of Project

• 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

Dispute Resolution
Any dispute arising out of or in relation to the
concession agreement, between the parties is
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.
Dispute Resolution Procedure for projects under
BOT and Consultancy
• Mediation by the Independent Engineer: 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.
• 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
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.
• Arbitration: Any dispute, which is not resolved
amicably, shall be finally settled by binding
arbitration under The Arbitration Act. The
Guidelines for Investment in Road Sector 15
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.
• 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.
• Dispute involving Foreign Contractor(s): 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.
General Trends in Dispute Resolution
The Courts in India have been very neutral in
construing the documents, in the cases arising out of
16 Guidelines for Investment in Road Sector

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.

OMT Concession Agreement

• 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
concession fee to NHAI7.
• 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 six highway sections which are

expected to be completed in the next 6 months to be
awarded on OMT basis. The pre-qualification of
bidders for two highway sections has already been
completed and invitations for participation have been
sent out to bidders for the other stretches.

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).
 Guidelines for Investment in Road Sector 17

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

Estimated Project Cost

Length
S. No. Stretch NH
(Km)
(INR Crore) (USD Million)

STATE: Assam

1 Udarband to Harangajo 54 31 202 40

STATE: Jammu & Kashmir

1 Banihal-Batole-Udhampur 1A 122 1035 207

2 Srinagar-Khanbal-Banihal 1A 32 129 26

3 Two Tunnels on Udhampur-Banihal- 1A 19 5000 1000

Srinagar Section

4 Udhampur Jammu (0-66) 1A 86 1011 202

STATE: Kerala 120

1 Walayar-Badakkancherry 47 55 600

STATE: Maharashtra

1 Nagpur Bypass 7 21 183 37

2 MP/MH Border to Manasar 7 37 158 31

3 Manasar to Nagpur I/C 7 36 227 45

Kamptee Kanoon

STATE: Punjab

1 Jallandhar-Amritsar 1 20 190 36

STATE: Tamil Nadu

1 Salem-Coimbatore Kerala 47 82 540 108

Border Section

STATE: Uttar Pardesh

1 Agra Bypass Km176-800 of NH-2 to 2,3 33 345 69

Km 13.03.0 of NH-3
18 Guidelines for Investment in Road Sector

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

Estimated Project Cost

Length
S. No. Stretch NH
(Km)
(INR Crore) (USD Million)

STATE: Andhra Pradesh

1 Vijaywada-Machhlipatnam 9 65 424 85

2 Hyderabad-Vijaywada 9 176 1141 228

3 Tirupati-Tiruthani-Chennai 205 138 900 180

STATE: Bihar

1 Patna-Muzaffarpur 19 & 77 60 391 78

2 Patna-Bakhtiarpur 30 53 346 69

STATE: Delhi

1 Delhi-Meerut 58 46 300 60

2 Delhi-Hissar (Delhi Portion) 10 20 130 26

STATE: Gujarat

1 Kandla-Mundra Port 8A 73 476 95

STATE: Haryana

1 Rohtak-Hissar 10 80 522 104

2 Panipat-Rohtak 71A 73 476 95

3 Rohtak-Bawal 71 97 632 126

STATE: Jharkhand

1 Hazaribag-Ranchi 33 75 489 98

STATE: Karnataka

1 Mulbagal-Kamataka/AP Border 4 11 72 14

2 Bijapur-Hospet 13 194 1265 253

3 Balgaum-Goa/KNT Border 4A 84 548 110

4 Kundapur-Surathakal 17 71 463 93

5 Mangalore-KNT/Kerala Border 17 18 117 23

STATE: Kerala

1 Charthalai-Paliakad 47 50 329 66

2 Pallakad-Thiruvananthapuram 47 123 805 161

3 Trivendrum-Kerala/Tamil Nadu Border 47 43 280 56

4 Kerala/Tamil Nadu Border Kanyakumari 47 70 456 91

 Guidelines for Investment in Road Sector 19

Estimated Project Cost

Length
S. No. Stretch NH
(Km)
(INR Crore) (USD Million)

STATE: Maharashtra

1 Nagpur-Wainganga Br 6 60 391 78

STATE: Orissa

1 Chandikhole-Duburi 200 39 254 51

2 Panikoili-Roxy 215 249 1623 325

3 Duburi-Talcher 200 98 639 128

4 Roxy-Rajamunda 215 20 130 26

STATE: Punjab

1 Amritsar-Wagha Border 1 35 228 46

2 Chandigarh-Kurali 21 30 195 39

3 Parwanoo-Shimla (Punjab, 22 110 717 143

Haryana and HP)

STATE: Rajasthan

1 Reengus-Sikar 11 41 267 53

2 Tonk-Kota-Deoli 12 64 417 83

3 Deoli-Jhalawar 12 178 1161 232

STATE: Tamil Nadu

1 Nagapatnam-Thanjavur 67 74 482 96

2 Krishnagiri-Tindivaram 66 170 1108 222

3 Trichy-Puddukotai-Ramanathapuram 210 200 1304 261

STATE: Uttaranchal

1 Muzaffernagar-Haridwar 58 & 72 77 502 100

2 Haridwar-Dehradun 72 69 450 90

STATE: West Bengal

1 Barasat-Bangaon 35 60 391 78

Total 3346 30441 6083

20 Guidelines for Investment in Road Sector

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

Estimated Project Cost

Length
S. No. Stretch NH
(Km)
(INR Crore) (USD Million)

STATE: Andhra Pradesh

1 Hyderabad-Yadgiri 202 30 196 39

STATE: Arunachal Pradesh

1 Itanagar-Arunachal Pradesh/ 52A 22 143 29

Assam Border

STATE: Assam

1 Doboka-Assam/Nagaland 36 124 808 162

Border-Dimapur

2 Baihata Chariali-Banderdewa 52 314 2047 409

3 Badardewa-Assam/ 52A 9 59 12
Arunachal Pradesh Border

4 Assam/Meghalaya Border to Assam/ 44 116 756 151

Tripura Boder

5 Silchar-Assam/Mizoram Border 54 50 326 65

STATE: Bihar

1 Muzaffarpur-Sonbasra 77 89 580 116

2 Motihari-Raxaul 28A 67 437 87

3 Bakhtiarpur-Begusarai-Khagarai-Purnea 31 255 1663 333

4 Gopalganj-Chapra-Hajipur 19 & 85 153 998 200

5 Forbesganj-Jogwani 57A 13 85 17

6 Mokama-Munger 80 70 456 91

7 Patna-Buxar 84 130 848 170

STATE: Chhatisgarh

1 Kumud-Dhamtari 43 23 150 30

2 Raipur-Simga 200 28 183 37

STATE: Goa

1 Panaji-Goa/KNT Border 4A 69 450 90

2 Maharashtra/Goa Border-Panaji Goa/ 17 139 906 181

KNT Border
 Guidelines for Investment in Road Sector 21

Estimated Project Cost

Length
S. No. Stretch NH
(Km)
(INR Crore) (USD Million)

STATE: Gujarat

1 Jetpur-Somnath 8D 127 828 166

2 Gujarat/Maharashtra Border-Surat 6 84 548 110

3 Gujarat/MP Border-Ahmedabad 59 210 1369 274

STATE: Jammu & Kashmir

1 Srinagar-Baramula-Uri 1A 101 659 132

STATE: Kerala

1 KNT/Kerala Border-Khozikode-Eddapally 17 451 2941 588

STATE: Maharashtra

1 Kalamboli-Mumbra (6 Laning) 4 20 130 26

2 Talegaon-Amravati 6 58 378 76

3 Pune-Sholapur 9 170 1108 222

4 Panvel-Indapur 17 84 548 110

STATE: Madhya Pradesh

1 Bhopal-Rajmarg Crossing-Jabalpur 12 297 1936 387

2 Bhopal-Sanchi 86(Ext.) 40 261 52

3 Indore-Jhabua-Gujara/MP 59 169 1102 220

4 Obaiduliaganj-Bheembetka 69 13 85 17

5 Jhansi-Khajuraho 75 100 652 130

STATE: Manipur

1 Nagaland/Manipur Border-Imphal 39 140 913 183

STATE: Mizoram

1 Assam/Mizoram Border-Aizawi 54 113 737 147

22 Guidelines for Investment in Road Sector

Estimated Project Cost

Length
S. No. Stretch NH
(Km)
(INR Crore) (USD Million)

STATE: Meghalya

1 Shillong (excluding Shillong Bypass)- 44 136 887 177

Assam / Meghalaya Border

STATE: Nagaland

1 Kohima-Nagaland-Manipur Border 39 28 183 37

STATE: Orissa

1 Sambalpur-Baragarh-Chattisgarh/ 6 84 548 110

Orissa Border

2 Bhubaneshwar-Puri 203 59 385 77

STATE: Punjab

1 Amritsar 15 101 659 132

STATE: Rajasthan

1 Kishangarh-Ajmer-Beawar 8 82 535 107

2 Jaipur-Reengus 11 54 352 70

3 Jaipur-Tonk 12 86 561 112

4 Beawar-Pali-Pindwara 14 246 1604 321

STATE: Uttar Pradesh

1 Muradabad-Bareilly 24 112 730 146

2 Bareilly-Sitapur 24 153 998 200

3 Ghaziabad-Aligarh 91 106 691 138

STATE: Tirpura

1 Tripura/Assam Border to Agartala 44 195 1271 254

STATE: Tamil Nadu

1 Dindigul-Perigulam-Theni 45(Ext.) 73 476 95

2 Madurai-Ramnathpuram- 49 186 1213 243

Rameshwaram-Dhanushodi

3 Coimbatore-Mettupalayam 67(Ext.) 45 293 59

4 Theni-Kumili 220 57 372 74

Total 6063 37044 7411

 Guidelines for Investment in Road Sector 23

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

Estimated Project Cost

Length
S. No. Stretch NH
(Km)
(INR Crore) (USD Million)

STATE: Andhra Pradesh

1 Chilkaluripet-Vijayawada-Elluru- 5 270 1712 342

Rajamundri

2 Tada-Neliore Bypass 5 130 824 165

3 Vishakapatnam-Ankapalli-Rajamundri 5 200 1268 254

4 Srikakulam-Vishakhapattanm Ankapalli 5 100 634 127

5 Neliore-Chilkaluripet 5 184 1167 233

6 Icchapuram-Srikakulam 5 140 888 178

STATE: Bihar

1 Aurangabad-Barwa Adda 2 70 444 89

2 Vanarasi-Aurangabad 2 140 888 178

STATE: Gujarat

1 Ahmedabad-Vadodara Expressway NE-1 95 602 120

2 Samaikhiali-Gandhidham 8A 56 355 71

3 Surat Dahisar (Gujarat portion) 8 120 761 152

4 Udaipur-Ahmedabad 8 140 888 178

STATE: Jharkhand

1 Barwa Adda-Panagarh 2 100 634 127

2 Aurangabad-Barwa Adda 2 150 951 190

STATE: Haryana

1 Gurgaon-Kotputli-Jaipur 8 126 799 160

(Haryana portion)

2 Panipat-Jalandhar 1 116 735 147

3 Delhi-Ahmebad 1 140 888 178

24 Guidelines for Investment in Road Sector

Estimated Project Cost

Length
S. No. Stretch NH
(Km)
(INR Crore) (USD Million)

STATE: Karnataka

1 Bangalore-Tumkur 4 65 412 82

2 Hubli-Chitradurga 4 200 1268 254

3 Chitradurga Bypass-Tumkur Bypass 4 145 919 184

4 Bangalore-Krishnagiri 7 55 349 70

5 Belgaum-Hubli 4 110 697 139

6 Kagal-Belgaum 4 77 488 98

STATE: Madhya Pradesh

1 Indore-Dewas 3 55 349 70

STATE: Maharashtra

1 Satara-Kagal-Belgaum 4 133 843 169

2 Pune Satara 4 145 919 184

3 Surat Dahisar (Maharashtra portion) 8 125 793 160

 Guidelines for Investment in Road Sector 25

Revenue Risks and Mitigation

Revenue realisation in BOT-Toll projects is subject to The concession agreement provides for extension or
some key risks including, but not limited to variation in reduction of the concession period in the event the
traffic, variation in toll rates, additional tollway, actual traffic falls short or exceeds the target traffic9, as
occurrence of premature termination on account of estimated on the target date10.
certain events. The concession agreement provides
for various risk mitigation mechanisms to the MCA also provides for termination of the agreement if
concessionaire including change in concession period, the average daily traffic in any accounting year
differential toll rates that are linked to cost of different exceeds the design capacity and continues to exceed
road structures under the new toll rules (linear for three subsequent accounting years. Termination in
alignment, bridges, tunnels, bypasses etc.) to such scenario will be deemed to happen on account of
providing for termination payments under force an Indirect Political Event.
majeure events.
Variation inToll rates (Linked to WPI)
Variation in Traffic The notification of the New National Highways Fee
Rules (2008) has provided for a revision of toll rates
Change in Cap on Concession
Type of Variation and hence realisable toll revenues for all vehicle
Concession Period Period Variation
For every 1%
categories. The new toll rules are applicable for all new
Actual Traffic <
shortfall,concession 20% road projects.
Target Traffic
period increase by 1.5%
For every 1% excess,
Actual Traffic >
concession period 10%
Target Traffic
reduction by 0.75%8

8. Waiver from concession period reduction can be obtained on payment of premium

9. The method for calculating Actual Traffic and Target Traffic is detailed in the MCA
10. Target Date is around 10 years from the date of the agreement in a 20 year concession period
26 Guidelines for Investment in Road Sector

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
EarlyTermination of Concession
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

During construction
Old Toll Rate New Toll Rates11 Event of
(after financial During operations
Rs./ trip (USD) Rs./ trip (USD) Default
closure)

Scenario 1 Concessionaire No payment Payment equal to 90% of debt

event of default due less insurance claims if any.
Light Motor Vehicle Light 79 80
Commercial Vehicle (~1.57) (~1.6) NHAI event of a. the total Debt Due
default b. 150% of the Adjusted Equity.12
128 130
(~2.5) (~2.6) Force Majeure

Scenario 2 Non-Political Payment equal 90%

Event of the Debt Due less Insurance Cover
Light Motor Vehicle Light 79 120
Commercial Vehicle (~1.57) (~2.4) Indirect Political a. Debt Due Less Insurance Cover
Event13 b. 110% of the Adjusted Equity

128 185 a. the total Debt Due

(~2.5) (~3.7) Political Event
b. 150% of the Adjusted Equity

11. As per new tolling rules, toll rate revision is determined by the formula - TR1 = TR0(1+3%) + TR0((1+3%)*%Variation in WPI*40%)
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

• Concessionaire Event of Default: 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
• Force Majeure Event: A force majeure event which
lasts for less than 180 days will lead to a
Guidelines for Investment in Road Sector 27
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
28 Guidelines for Investment in Road Sector

Overview of
Successful Projects
PPP is gradually proving to be a successful The project was completed 5 months ahead of its
mechanism for developing and maintaining the s ch e d u l e d c o m p l e t i o n d a t e ( 2 0 0 5 ) . T h e
National Highways, as is evident from the increased concessionaire also earned a bonus of INR 42.25
private sector participation in projects till date. Crore (USD 8.5 million) in the form of early tolling
during the period before scheduled completion date.
Cost in Even today, the concessionaire is earning more
Number of Contracts
INR Crore USD Billion revenues than those projected at the time of bidding.
BOT Toll However, the excess revenue is being shared
Awarded 61 3839 28976 6
Completed 18 821 5896 1 between the concessionaire and NHAI as per the
BOT DBFO revenue sharing clause in the agreement.
Awarded 8 1034 7785 2
Completed
BOT Annuity Belgaum – Maharashtra Border Section of NH-4
Awarded 25 1376 9412 2
Completed 8 561 2350 1 (Annuity Project)
Source: NHAI
The project involved widening of existing two lanes to
Toll collection depends on two factors - traffic volume 4-lane divided carriageway facility including the
and tolling rate. The toll rates are pre-specified by rehabilitation of existing 2-lanes on annuity basis. The
NHAI. Estimates of traffic growth for projects are also estimated cost of this 78 km long road project is INR
provided by NHAI based on detailed feasibility studies. 332 Crore (USD 66.4 million; NHAI Estimate). The
However, bidders are advised to carry out section has two toll plazas.
independent due-diligence of the traffic and growth
estimates. The profitability of tolled National Highways The project was awarded to the consortium of M/s
has made the sector extremely competitive and ILFS, M/s Punj Lloyd Ltd. and M/s Consolidated Toll
attractive. In light of the forecasts for traffic growth on Network India Ltd. The concession period is 17 years
important road corridors, the Government has given and 6 months. The concessionaire completed the
first preference to Build-Operate Transfer project in October 2004, two months earlier than the
(BOT/DBFOT) toll projects. stipulated project completion date, and was paid a
(performance) bonus of INR 42.16 Crore (USD 8.4
Jaipur- Kishangarh BOT Project –NH 8 million) on account of early completion.
Jaipur-Kishangarh is one of the earliest projects
implemented on BOT framework. The project involved Second Vivekananda Bridge (now Sister Nivedita
4-laning a length of approximately 91 km from Jaipur Bridge)- BOT Project in Kolkota:
to Kishangarh (NH-8), in the state of Rajasthan at an This bridge is one of the first BOT projects, undertaken
estimated cost of INR 644 Crore (USD 129 million- by NHAI in 1995. The concession agreement was
NHAI estimate). NHAI provided a grant of INR 211 signed in September, 2002.The consortium members
Crore (USD 42 million) to the project. The concession are from USA, U.K, Mauritius and India. Though the
period of the project is 20 years. financial close was delayed by one year, the
 Guidelines for Investment in Road Sector 29

construction thereafter was almost on time and the Foreign companies are executing 12 contracts
bridge was commissioned on 4th July, 2007. This bridge exclusively and 35 contracts as joint venture partners
also won the award of excellence for the year 2007 with Indian companies. Foreign investors are allowed
under the Foreign Bridge Project Category from the 100 per cent foreign direct investment in road sector
American Segmental Bridge Institute. NHAI had (Please refer section on page 32). The total value of
provided a grant of INR 120 Crore (USD 24 million) out contracts with foreign participation is estimated to be
of the total project cost of INR 640 Crore (USD 128 more than INR 12,000 Crore (USD 2.4 billion)
million). The concession period of the project is 30
years.
Construction No. of No. of Length
Firms Foreign Firms Projects (in km)
Jawaharlal Nehru Port Connectivity Project in
Maharashtra BOT (Toll) 16 16 1680
This project has been undertaken as part of a
BOT (Annuity) 5 5 361
programme for adequate road connectivity to major
ports through an SPV of NHAI (Jawaharlal Nehru Port 34 71 3570
EPC Contracts
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 Country wise breakup of Foreign and JV
completed in July 2005. This project is a symbolic Companies involved in development work of
representation of a successful venture of NHAI, National Highway Projects
Jawaharlal Nehru Port and State Government
represented by City and Industrial Development Contractors
S. No. Country
Corporation of Maharashtra Ltd. (CIDCO). Phase-II of JV Independent

the project for 4-laning of 14 km and the 6-laning of 1. China 9 2

Panvel Creek Bridge (length: 397m) at a cost of INR 2. Dubai 1 0
143 Crore (USD 29 million) has been taken up and 3. Malaysia 18 7
likely to be completed soon. Encouraged by the
4. Iran 1 0
results, Phase –III at a cost of INR 279 Crore (USD 56
million), is also being taken up. The concession given 5. Singapore 1 0
to the SPV of NHAI is for 20 years from December 6. Saudi Arabia 1 0
2000. The SPV made profits (after tax) of INR 16.4 7. UK 4 0
Crore (USD 3.3 million), INR 20.3 Crore (USD 4 million)
8. Indonesia 1 1
& INR 21.7 Crore (USD 4.3 million) in 2005-06, 2006 -
07 & 2007-08 respectively. 9. Korea 5 0

10. Spain 5 0
Participation of Foreign Contractors 11. Taiwan 1 1
Foreign contractors started participating in NHDP
12. Thailand 2 1
contracts (and to a limited extent in state highway
projects) from 2000-01. In 2000-01, there were about 13. Turkey 1 0
20 contracts in the NHDP, where foreign contractors 14. Philippines 1 0
participated either on their own or in joint ventures; the 15. USA 1 1
number grew to about 32 in 2003. The foreign
16. Russia 1 1
contractors taking part were from Malaysia, Korea,
China, Russia, Turkey, Indonesia, Iran and some niche 17. Italy 1 0

contractors from Europe for specialised jobs. It is Total 54 14

presently estimated that about a dozen foreign road
contractors are operating in India.
30 Guidelines for Investment in Road Sector
Policy Framework
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.
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
 Guidelines for Investment in Road Sector 31

• Land for right-of-way and enroute facilities • Where design is left to the enterprise, giving
• Clearance of the right-of-way land: Relocation of details of standards and bore holes logs at bridge
utility services, cutting of trees, resettlement and sites etc.
rehabilitation of the affected establishments
• Environment Clearances
• Clearance from Indian Railways to allow
construction of Rail-Over-Bridges under their
supervision.

Government Support for Major Clearances required for Road Projects

CLEARANCES CLEARING AUTHORITY

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

Techno economic Clearances Ministry of Shipping, Road Transport & Highways/ Public Works Department/
National Highways Authority of India

Pollution Clearance (water & air) Central Pollution Control Board

Forest Clearance Ministry of Environment & Forests

Environmental Clearance Ministry of Environment & Forests

Company Registration Registrar of Companies

Rehabilitation & Resettlement of Displaced Ministry of Shipping, Road Transport & Highways, State Governments and NHAI
families
32 Guidelines for Investment in Road Sector

Foreign Direct Investment

(FDI) Policy
Introduction
Foreign Investment (in billion $)
The FDI regime has been progressively liberalised
during the course of the 1990s (particularly after 1996)
with most restrictions on foreign investment being Direct Foreign Investm ent
removed and procedures simplified. With limited Portfolio Foreign Investment
exceptions, foreigners can invest directly in India, 29.3

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 15.5
a limited extent), railway transport and atomic energy, 12.5
11.4
where the existing and notified sectoral policy does 9.3
8.5
7.7
not permit FDI beyond a certain ceiling. 7.1
6
5 4.3

The major source of FDI in India is through the equity 1

route, which accounted for 81% of the total FDI 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
inflows in India. Reinvested earnings of FDI
Source: RBI
companies accounted for 18% of the total Direct
Investment. Acquisitions accounted for 17% of total
FDI.

Routes For Foreign Direct Investment

Investment Climate – FDI Current Situation

FDI in

Prior Permission (Foreign Investment

Automatic Route
Promotion Board)
No prior government approval required
Decision generally within 4–6 weeks

FDI equity limit-Automatic Route FDI Requiring prior approval

• Roads -100% • Defense production -26%
• Insurance – 26% • FM broadcasting – Foreign equity 20%
• Domestic airlines – 49% • News and current affairs – 26%
• Telecom services – Foreign equity 74% • Broadcasting – cable, DTH, up-linking – Foreign equity
• Private sector banks – 74% 49%
• Exploration and mining of coal, lignite, diamonds and • Test marketing – 100%
precious stones – 100% • Single Brand Retailing 51%
• 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
• 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
 34 Guidelines for Investment in Road Sector

Tax Environment

Taxation System In India Rates of Taxation14

India has a well-developed tax structure with the
Domestic Companies Foreign Companies
authority to levy taxes divided between the central
and the state governments. Since 1991 tax system in • Taxed at worldwide income • Taxed at income which is
earned from a business
India has undergone a radical change in line with • Taxed at 30%
connection in India or from a
liberal economic policy. Brief description of taxes • If taxable income > INR source/asset located in
prevalent in India is given below: 10,0 0 0,0 0 0; Surcharge India.
applicable @ 10% of tax.
• Taxed at 40%
Taxation in India • Education cess of 3% of tax
• If taxable income > INR
(and surcharge if applicable)
10,0 0 0,0 0 0; Surcharge
Central State
• Dividend Distribution Tax applicable @ 2.5% of tax.
Direct Taxes Indirect Taxes Other Taxes Indirect Tax (DDT) is levied @ 16.995%
• Education cess of 3% of tax
on the amount of dividend
Personal Income Tax Customs Duty Professional Tax Value Added Tax
(and surcharge if applicable)
declared.
• No Dividend Distribution Tax
Wealth Tax Excise Duty Entry Tax
(DDT)
Corporate Tax Central Sales Tax Octroi

Service Tax Both the companies may be liable to Minimum Alternate Tax (MAT) of 10% 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.
DirectTaxation
Tax incentive for Roads
100% tax holiday is available for those who are Minimum AlternateTax (MAT)
engaged in development of roads and highways. Such The tax law requires companies to pay a minimum tax
tax holiday can be availed for any consecutive period of which is called as MAT on the basis of profits
10 years within a block of 20 years starting from the disclosed in the financial statements. It is payable in
year when the person starts developing the the event when tax liability under normal provision is
roads/highways. Following conditions needs to be less than the MAT. In such a case, companies are
fulfilled by such person: liable to pay 10% (plus applicable surcharge of 10% for
• There should be a company registered in India; domestic companies and 2.5% for foreign companies
• Such company is awarded a contract by the and 3% education cess thereon for both) of book
government or its agency to develop the profits as MAT. Book profits for this purpose are
roads/highways; computed by making prescribed adjustments to the
• A certificate from an accountant certifying the net profit disclosed by the corporations in their
deduction. financial statements.

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


MAT paid by companies can be carried forward for 7
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 DistributionTax (DDT)
Dividend distributed by an Indian company is exempt
from income-tax in the hands of all shareholders.
However, the Indian company is liable to pay a tax
called Dividend Distribution Tax (DDT) of 16.995
percent (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.
Guidelines for Investment in Road Sector 35
Fringe BenefitTax (FBT)
FBT has been introduced in India from the income
year beginning April 1, 2005. It is payable by a covered
employer on the benefits provided or deemed to have
been provided to past and present employees. The
benefit need not be provided directly by the employer
for FBT to apply. The FBT legislation has identified an
exhaustive list of expenses which are deemed to be
fringe benefits to the extent of 20% or 50% or 100%
of the cost incurred or payment made by the
employer. A concessional rate of 5% has also been
prescribed in select instances. Payment of FBT is not
allowed as a deductible expense from the taxable
income. Further, FBT is payable irrespective of
whether the employer has taxable income in India or
not.
In case of a domestic company, FBT is payable at a rate
of 33.99% (including 10% surcharge and 3%
education cess). However, in case of a foreign
company, FBT is payable at a rate of 31.6725%
(including the 2.5% surcharge and the 3% education
cess).
36 Guidelines for Investment in Road Sector

Withholding tax
Withholding tax compliance

Tax withholding and deposit Requisite Challan

• Tax on payment is required to be deducted :- • Tax withheld has to be deposited in Form ITNS-281. With
– When Income is taxable in India; and effect from 1 April 2008, all corporate will have to pay tax
electronically
– At the time of credit or payment of such income, whichever
is earlier • With effect from 1 July 2009, new compliance procedures are
applicable
• Amount of tax withheld is required to be deposited with the
government within 7 days from the end of the months in
which tax was withheld

Quarterly statement Withholding tax certificate

• 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 15, October 15,
Jan 15 and April 15*
* In case the tax is withheld on 31st March, details of such tax
can be filed by 15 June
• 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

Determination of Taxable Income

Profit / Loss Deduct taxes already paid to Is amount

arrive at net taxes payable / Net taxes payable
as per positive?
Accounts refundable Y

Tax payable is equal to tax N

Add: Expenses Disallowed under normal provisions Net taxes refundable
as per Income Tax Act and
considered in accounts
Y

Is Tax payable
Tax payable is
under normal
equal to tax
Less: Expenses Allowed provisions higher
under MAT
as per Income Tax Act but than tax payable
N provisions
not considered in accounts under MAT?

Apply applicable tax rates

(including Surcharge & Education Calculated tax payable
Cess) to the taxable income to under ‘Minimum alternate
arrive at gross tax payable under Tax’ (MAT) provisions
normal provisions.
 Guidelines for Investment in Road Sector 37

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)

List of countries with which India has a DTAA

Armenia Egypt Kazakhstan Netherlands Turkmenis UAE

Australia Finland Kenya New Zealand Spain UAR (Egypt)

Austria France Korea Norway Sri Lanka Uganda

Bangladesh Germany Juwait Oman Sudan UK

Belarus Greece Kyrgyz Republic Phillippines Sweden Ukraine

Belgium Hungary Libya Poland Syria USA

Brazil Iceland Malaysia Qatar Tanzania Uzbekistan

Bulgaria Indonesia Malta Romania Thailand Vietnam

Canada Ireland Maruitius Russia Turkey Zambia

China Israel Mongolia Saudi Arabia Tazakhistan

Cyprus Italy Morcco Singapore Portuguese Republic

Czech Republic Japan Namibia Slovenia Trinidad and Tobago

Denmark Jordan Nepal South Africa Swiss Confederation

38 Guidelines for Investment in Road Sector
IndirectTaxation
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.
Name of Duty / Cess
Basic Customs Duty ('BCD')
Additional Customs Duty in lieu of Execise duty ('CVD')
Education Cess (including the Secondary Higher
Education Cess of One percent)
Additional duty of Customs in lieu of local taxes ('ADC')
Incentives/Exemptions
• Exemption for specified projects: An importer
of specified goods is eligible to claim exemption
from payment of Customs duty16 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
15. Capital goods can be imported at the general rate of 7.5 %
16. Notification No. 21/2002-Cus, dated 1 March 2002
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
Rate
of such goods manufactured in India, where such
10%15
supplies qualify as 'Deemed Exports'. As per the
14.42% FTP, Deemed Exports refer to certain transactions
3% wherein the goods supplied do not leave the
country and payment for supplies is received in
4% 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
Excise duty is levied by the Central Government on the
manufacture of movable goods in India at the time of

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 14.42% (Basic Excise Duty 14%,
Education Cess 3%). Credit of Excise duty paid is
available against the output Excise duty liability/output
service tax liability.
Incentives/Exemptions
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.
ServiceTax
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
• S i t e fo r m a t i o n , c l e a r a n c e , exc ava t i o n ,
earthmoving and demolition services
• Works contract services
• Management, maintenance or repair services
Incentives/Exemptions
Construction of roads has been specifically exempted
from levy of Service tax under the following taxable
categories:
• Commercial or industrial construction services
• Site formation and clearance, excavation,
earthmoving and demolition services17
• Works contract services
17. Notification No. 17/2005-ST, dated 7 June 2005
Guidelines for Investment in Road Sector 39
Value Added tax ('VAT')
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.
Central SalesTax ('CST')
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.
Goods and Service tax - Proposed
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. However, the road map for its implementation is
still to be released. The final destination of the reform
process would be introduction of GST in lieu of Excise
duty, VAT, CST and Service tax.
As per recent media reports, the Empowered
Committee of State Finance Ministers are exploring
the possibility of a dual GST structure in India, one at
the Central level and another at the State level. The
committee further recommended a single rate for
services and two rates for goods, at the Central and
State level.
40 Guidelines for Investment in Road Sector

Repatriation of Investments and

Profits Earned in India
Type of Income streams

Royalty Technical
Dividend Interest
Fees

Rates of Domestic law Best treaty Domestic law Best treaty Domestic law Best treaty Domestic law Best treaty
taxation NIL(a) rate 10% 21.115% rate 10% 10.56% rate 10% 10.56% 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

Ceiling on Amount of repatriation (if any)

Royalty/ Technical Fees under technical collaboration 5% on local sales and 8% on exports and lump-sum payment not
exceeding USD 2 million or its equivalent

Brand Name Royalty without technical collaboration 1% of on local sales and 2% on exports sales

• Royalties and Technical Know-how Fees: permission of RBI is necessary for effecting
Indian companies that enter into Technology remittance, subject to specified compliances.
Transfer Agreements with foreign companies are
• Interest: Payment of interest borrowed from
permitted to remit payments towards know-how
overseas would be governed by the regulation
and royalty under the terms of the foreign
regarding external commercial borrowings.
collaboration agreement, subject to limits.
• Buyback of shares: A maximum of 25% of
• Dividends: Dividends are freely repatriable after
equity share capital permitted to be repurchased
the payment of Dividend Distribution Tax by the
in a financial year. Buyback is possible only from
Indian company declaring the dividend. No
free reserves, share premium and proceeds

Dividends are not allowed as deduction. Royalty/ fee for technical services/ interest are allowed as
deduction subject to transfer pricing norms

Repatriation of capital
Redemption of
Buy back of shares
preference share
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.
• Redemption of preference shares: 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% would be payable on coupon on
preference shares
Guidelines for Investment in Road Sector 41
Liquidation of company
Capital Reduction
• Capital reduction: The company law provision
provides for a detailed procedure wherein the
capital of company can be reduced and money
c a n b e r e p a t r i a t e d b a ck . A s p e c i a 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% in the hands of Indian company
• Liquidation of 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
42 Guidelines for Investment in Road Sector

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 Shipping, Road
Transport and Highways (MoSRTH) 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

Ministry of Shipping, Road Transport and

Highways (MoSRTH), National Highway
Expressways State capitals and tier 1 cities
Authority of India (NHAI) and State Road
Development Corporations

MoSRTH, NHAI, BRO Union capital, state capitals, major ports,

National Highways
(Border Roads Organisation) strategic locations

State capitals, district centres, important

State Highways State Public Works Departments ( PWDs)
towns, national highways, other states

State Capitals, district centres,

Major District Roads State PWDs
important towns, national highways

Production centres, markets, highways,

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

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

Urban Roads Municipal Corporations Intra city networking

Villages, district roads, highways,

Village Roads Zilla Parishads/State Governments
railway stations, riversides etc
 Guidelines for Investment in Road Sector 43

Administrative Framework for Roads

Institutional Advisory Framework

Facilitated by
Committee on Infrastructure
Planning Commission
Finance Ministry/PPP Cell Central Level

MoSRTH MoRD
(allocation
of funds for the development
(allocation of funds for the development and
maintenance of highways) and maintenance of rural roads )

Department of Road
Transport & Highways

NHAI
(NHDP implementation,
operations and Planning, Policy Secretary
maintenance) and Budgeting Panchayat Raj

State Level

State PWD
State PWD Rural Redevelopment
State Highways
(NH-Wing) & Panchayat Raj
MDRs,ODRs, Village
Roads (Rural Roads)

Road Development Corporations

(Construction, Maintenance and
Operation of Roads)
44 Guidelines for Investment in Road Sector

About NHAI

The National Highways Authority of India (NHAI) was
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 Shipping, Road Transport &
Highways (MoSRTH), Government of India.
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

The charter of NHAI is set out in the National

Highways Act, 1956 and National Highways Authority
of India Act, 1988:
• Delegation of power 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
 Guidelines for Investment in Road Sector 45

Organisation Structure of NHAI is set out below:

NHAI CORPORATE

NHAI
OFFICE

Technical Finance Administration

Project Corridor
Management Management
NHAI FIELD
OFFICES

Project
Corridor
Implementation Unit (PIU)
Management Unit (CMU)

The administrative framework at the Head Office is set out below

Chairman Central Vigilance

Officer

Member Member Member Member Member

Finance Administration Technical (1) Technical (2) &(3) PPP

CGM (HR & CGM (S R&D) CGM (Technical)-

CGM (Finance) CGM (PQ)
Admn) CGM (Safety) (2) & (3)
CGM (LA)
CGM (IT)
CGM (CM)
CGM (Legal)
46 Guidelines for Investment in Road Sector

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
13. Manual and Specification for 4-laning
14. Manual and Specification for 2-laning
15. Road Transport Policy
16. Reserve Bank of India Policy
Useful Addresses
National Highways Authority of India Registrar of Companies
G 5&6, Sector-10, Dwarka, Department of Company Affairs
New Delhi - 110 075 Ministry of Finance
Phone: 91-011-25074100 & 25074200 'B' Block, IInd Floor, Paryavaran Bhawan
Fax : 91-011-25093507, 25093514 C.G.O. Complex, New Delhi-110 003, India
www.nhai.org www.dca.nic.in

Ministry of Finance, Government of India / Border Roads Organisation

Department of Economic Affairs Seema Sadak Bhawan
North Block, New Delhi Ring Road Naraina
www.finmin.in Delhi Cantt 110010
www.bro.nic.in
Department of Road Transport and Highways
Transport Bhavan Central Institute of Road Transport
1, Parliament Street Bhosari, Pune - 411026, India
New Delhi 110 001 www.cirtindia.com
www.morth.nic.in
National Portal of India
Department of Industrial Policy and Promotion www.india.gov.in/
Joint Secretary
Secretariat for Industrial Assistance (SIA) Directory of Indian Government Websites
Ministry of Commerce & Industry www.goidirectory.nic.in/
Udyog Bhavan, New Delhi-110 011, India
www.dipp.nic.in Press Information Bureau (PIB)
www.pib.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