Guidelines for Investment in Road Sector - National Highways ...

Government of India
Ministry of 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 11
Revenue Risks and Mitigation 26
Overview of Successful Projects 29
Policy Framework 31
Foreign Direct Investment Policy 33
Tax Environment 35
Repatriation of Investments
and Profits Earned in India 41
Administrative Framework 43
About NHAI 45
Annexure 47
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.
Deloitte refers to Deloitte Touche Tohmatsu India Private Limited

4
Guidelines for Investment in Road Sector
Executive Summary
The National Highway network of the country spans
about 70,548 km. The National Highway Development
Project (NHDP), covering a length of about 54,000 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 late 1990s acknowledged
the importance of private sector in India's
infrastructure development.
The consistent policy and institutional framework,
which has been the backbone of the more than INR
1
3,00,000 Crore (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 Total Project Cost of approximately
2
USD 23 billion (including BOT/DBFOT -Toll and BOT-
Annuity contracts) have been awarded under
various packages till December 31, 2010 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.
1. INR 50 = 1 USD : figures approximated
2. Design Build Finance Operate & Transfer
(DBFOT)

Guidelines for Investment in Road Sector 5
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 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 approximately 8%in the
last five years
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 National Highways
Development Project (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 54,000 km, entailing an estimated investment
of more than INR 3,00,000 Crore (USD 60 billion).
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
3
equity 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.
2.
3.
4.
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.
Highways along the North-South (NS) and East-
West (EW) corridors, covering a length of 981 km
Port connectivity projects covering a length
of 356 km; and
Other highway projects, covering a length of 315
km
The National Highways Authority of India (NHAI) is
mandated to implement the 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 Build Operate and Transfer (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
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.
4-laning of the GQ has almost been completed. Phase
II is expected to be largely completed by March 2011.
3. Deloitte Research

6
Guidelines for Investment in Road Sector
Phase III - Upgradation of 12,109 km
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.
Phase IV - 2-laning of 20,000 km with paved shoulders
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).
Phase V - 6-laning of 6,500 km
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. 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 (USD 3.3 billion) has been approved by
the Government. Apart from the high density
corridors, a substantial part of the National Highways
th
network would also require development during the 12
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.
60000
55000
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
14889
4
Current Status of NHDP
9454
30111
54454
Completed Work in Progress To be Awarded Total
4. Length in Km. as on December 31, 2010.

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
Category
Awarded
Awarded Cost
Completed
No. of Contracts Length in km (INR Crore) No. of Contracts Length in km
World Bank Funded Projects
NHDP Phase I
18
983
5,538
17
932
GQ
18
983
5,538
17
932
Others
-
-
-
-
-
NHDP Phase II EW Corridors
12
482
3,208
-
-
Sub-Total A
30
1,465
8,746
17
932
ADB Funded Projects
NHDP Phase I
10
615
1,866
10
615
GQ
9
567
1,807
9
567
Others
1
48
59
1
48
NHDP Phase II NS & EW Corridors
31
1,636
7,565
18
1,018
Sub-Total B
41
2,251
9,431
28
1,633
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)
78
3,866
18,811
52
2,715

8
Guidelines for Investment in Road Sector
Presently, the development and maintenance of
National Highways is financed by following modes:
1.
2.
3.
4.
Government's general budgetary sources
Dedicated accruals under the Central Road Fund
(by levy of cess on fuel)
Lending by international institutions:
•
•
•
World Bank
ADB
JBIC
Private financing under PPP frameworks
• Build Operate and Transfer/Design Build
5
Finance 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. The disbursement of such
grant is subject to provisions of the project concession
agreements (A compact Disc (CD)containingoverview
of the
Model Concession Agreement for BOT - Toll
projects is enclosed wit the brochure).
Approved Financing Plan of NHDP
Phase Particulars
Projected For (Kms) INR Crore
NHDP-I
NHDP-II
NHDP-III
NHDP-IV A
NHDP-V
NHDP-VI
NHDP-VII
Cess and Market Borrowings
External Assistance
BOT/SPV
Total (At 1999 Prices)
Cess and Market Borrowings
External Assistance
BOT/SPV
Total (At 2002 Prices)
Budgetary Support
Cess and Market Borrowings
BOT/SPV
Total (At 2004 Prices)
Private Sector
Government Spending
Total (At 2006 Prices)
Cess and Market Borrowings
BOT/SPV
Total (At 2006 Prices)
Cess and Market Borrowings
BOT/SPV
Total (At 2006 Prices)
Cess and Market Borrowings
BOT/SPV
Total (At 2007 Prices)
7498
6647
12109
5000
6500
1000
700
18,846
7862
3592
30300
23420
7609
3310
34339
12809
17688
50129
80626
4608
2342
6950
5519
35691
41210
7680
9000
16680
6302
10378
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 received Negative Grant (upfront payment payable by
successful bidder to NHAI) instead of grant / VGF as an outcome of the competitive bidding process. Further,
under the revised MCA, projects under BOT/ DBFOT framework have also been awarded on a revenue share /
premium basis, where the bidder offering the highest revenue share / premium is awarded the project.
Projects awarded on Negative Grant
Road Section
Length (Km.)
Estimated
Cost
(INR Crore)
Estimated
Cost
(USD Million)
Negative Grant
(INR Crore)
Negative Grant
(USD Million)
Delhi-Gurgaon
28
710
142
61
12
Rajkot Bypass-Jetpur
36
388
78
59
12
Panipat Elevated Highways
10
270
54
96
19
Salem- Karur
42
253
51
46
9
Krishnagiri - Thopurghat
62
372
74
140
28
Tindivanam-Ulundurpet
71
480
96
152
30
Thirssur-Angamali
40
312
62
84
17
Jalandhar- Amritsar
49
263
53
7
1
Ambala-Zirakpur
36
298
60
106
21
Dhule-Pimpalgaon
118
556
111
59
12
Vadodara Bharuch
83
660
132
471
94
Bharuch-Surat
65
492
98
101
Projects awarded on Revenue Share Basis
Road Section
Length (Km.)
Estimated
Cost
(INR Crore)
Estimated
Cost
(USD Million)
Revenue Share (%)
Surat-Dahisar
239
2,600
520
38%
Gurgaon-Jaipur
225
1,900
380
48%
Panipat-Jalandhar
291
2,200
440
20%
Chennai-Tada
42
317
63
17%
Vijayawada-Chilkaluripet
85
1,173
235
2%
Krishnagiri-Walajhapet
148
1,250
250
7%

10
Guidelines for Investment in Road Sector
Projects awarded on Premium
Road Section
Length (Km.)
Estimated
Cost
(INR Crore)
Estimated
Cost
(USD Million)
Premium
(INR Crore)
Premium
(USD Million)
Chengapalli to Coimbatore Bypass
and End of Coimbatore Bypass
55
853
171
36
7
Indore-Jhabua-Gujarat/MP
155
1,175
235
23
5
Hyderabad-Yadgiri
36
388
78
12
2
4 Laning of Godhara to
Gujarat /MP Border
87
786
157
8
2
Panipat - Rohtak
81
807
161
45
9
Kandla - Mundra Port
71
954
191
42
8
Rohtak - Bawal
83
650
130
12
2
Deoli - Kota
83
593
119
49
10
Sambalpur-Baragarh-Chattisgarh
/Orrisa Border
88
909
182
1
0
Belagaum-Khanpur (4-lane)
82
359
72
2
0
Jetpur-Somnath (4-lane)
123
828
166
23
5
Pune – Satara
140
1,725
345
91
18
Samaikhiali-Gandhidham
56
805
161
58
12
Indore-Dewas
45
325
65
24
5
Belgaum-Dharwad
80
480
96
31
6
Chitradurga -Tumkur Bypass
114
839
168
140
28
Six Laning of Hosur-Krishnagiri
60
535
107
67
13
Panvel - Indapur
84
943
189
34
7
Luchiyana - Talwandi
78
479
96
1
0

Guidelines for Investment in Road Sector 11
Public Private Partnership in
Highway Development
Initially, projects under NHDP were awarded as item
rate cash contracts. However, going forward, 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:
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.
•
•
•
Build, Operate and Transfer (Toll) Model on
DBFOT basis
Build, Operate and Transfer (Annuity) Mode on
DBFOT basisl
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. (Refer the National
Highways Fee [Determination of Rates and Collection]
Rules 2008 and its amendments dated December 3,
2010 and January 12, 2011).
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
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

12
Guidelines for Investment in Road Sector
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 threshold technical
and financial criteria set out in the RFQ Document.
project would be executed only by such EPC
Contractors who have completed atleast a single
highway project of more than 20% of the estimated
project cost of the project or INR 500 Crore (USD
100 million) which ever is less in the preceding 5
financial years from the application due date.
Some of the recent significant amendments in the pre
qualification document are set out below:
Notice inviting tenders is posted on the web site and
published in leading newspapers
1. Determination of technical and financial capacity of
consortium applicants in proportion to the
committed equity holding of each consortium
member in the project SPV. For illustration-
- If Company A has been assessed to have an
experience score (measured in terms of
payments made/received and/or revenues
received for eligible projects) of 5,000 and
Company B has been assessed to have an
experience score of 2,500, in a Consortium with
shareholding of A as 60% and B as 40%, then the
weighted experience score of the Consortium
shall be:
5,000*60%+2,500* 40%=4,000
- If Company A with a net worth of INR 1000 Crore
(USD 200 million) & Company B with a net
worth of INR 500 Crore (USD 100 million) are
bidding together as a Consortium with
shareholding of A as 60% and B as 40% then the
weighted financial score of the Consortium shall
be:
1,000*60%+500*40%= INR 800 Crore (USD 160
million)
2. In case of foreign companies, a certificate from a
qualified external auditor who audits the books of
accounts of the Applicant or the Consortium
Member in the formats provided in the country
where the project has been executed shall be
accepted, provided it contains all the information
as required in the prescribed format of the RFQ.
3. Applicants/Bidders would need to provide an
undertaking to NHAI that the EPC works of the
Stage 2: Commercial bids from pre-qualified bidders
are invited through issue of RFP. For BOT-(Toll)
projects the bid parameter is the premium offered to
the NHAI or the grant sought from NHAI. In BOT-
(Annuity) projects the bid parameter is the semi annual
annuity sought from NHAI.
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.
Summary of recent policy changes in the project
development and award process are set out below:
Based on its experience and the discussions with
various stakeholders, the RFQ, RFP and the MCA are
being updated continuously. Some of the important
changes made in these documents are as under:
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)

Guidelines for Investment in Road Sector 13
increased from 5% to 10% for the entire six-laning
programme.
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
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 pre-qualification will be equal to the
estimated project cost of the 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 (fixed amount)
(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
preceding year for the entire tenure of the
concession.
a. Termination provisions under capacity
augmentation situations modified to give more
comfort to investors and lenders. The
concession period can be extended upto 5
years to yield a post tax equity IRR of 16%, in the
event of capacity augmentation option
exercised 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 pre-qualification 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
6
The aforesaid changes are expected to further
incentivise private investment in road/highway
projects.
Opportunities for Private Investors/ Developers
More than 60% of the projected investment
requirement for the NHDP (more than 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
etc. and other stakeholders such as advisors,
financiers and sector professionals. Only about 21 per
cent of the total highways in India are 4-laned / 6-
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.
6. As per recommendations of B K Chaturvedi Committee

14
Guidelines for Investment in Road Sector
Roads
stakeholders based on internationally accepted
principles and best practices. Throughout, it seeks to
achieve reasonable balance of risks and rewards for all
Development
Projects
Construction
Tolling
Urban
Transportation
Trucking
Tourism
the participants.
BOT/
DBFOT - Toll
Equipment
Services
Pvt Bus
Service
Perishables
Luxury
Buses
As an underlying principle, risks have been allocated to
BOT -
Annuity
Material
Equipment
Containers
the parties that are best suited to manage them.
Project risks have, therefore, been assigned to the
OMT
SPV
Technology
Bulk
private sector to the extent it is capable of managing
them. The transfer of such risks and responsibilities to
Maintenance
the private sector would increase the scope of
Logistics & Services
innovation leading to efficiencies in cost and services.
Infrastructure Development
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 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:
Risk Framework of Model Concession Agreement
The MCA has been developed in consultation with all
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

Guidelines for Investment in Road Sector 15
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
th
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 27).
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

16
Guidelines for Investment in Road Sector
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
Other 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
Authority.
by concessionaire on behalf of the
• 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.
• 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 [upto 40% of TPC] can be
provided as equity support).

Guidelines for Investment in Road Sector 17
• 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.
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 PPP projects
• 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
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.

18
Guidelines for Investment in Road Sector
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
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.
BOT - (Annuity) projects are similar to Bot - (Toll)
projects with the exception that the traffic risk is borne
by NHAI and the concessionaire is paid fixed semi
annual annuities by NHAI.
OMT Concessions
• 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
7
fee to NHAI
• Either party is allowed a period of 45 days from the
date of signing of the concession agreement to
fulfill the Conditions Precedent for commencement
of commercial operations.
• The OMT concessionaire will pay a fixed concession
fee to NHAI every month (equivalent to one-twelfth
of the annual quoted amount) and undertake tasks
of toll collection and operation and maintenance of
highways
NHAI has identified twelve highway sections which are
expected to be awarded on OMT basis in the next 6
months. The concession agreements for three
highway sections have been signed and the Letters of
remaining four projects are at conception stage. More
sections, where project completion is anticipated in
the next 6-12 months, are being planned for OMT
concessions.
along with construction of additional
project facilities as per the scope of work.
Award have been issued for three projects. Two
projects are being subjected to rebidding and the
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 19
The upcoming opportunities for investment in various Phases of NHDP are provided in the tables below:
Opportunities for Investment Under NHDP Phase II *
S. No. Road Section
Length
(Km)
(INR Crore)
Estimated Project Cost
(USD Million)
1
Ghoshpukur-Salsalabari
163
1,549
310
2
Walayar-Vadekancherry
54
513
103
3
Ramban - Banihal
36
1,444
289
4
Udhampur-Ramban
43
1,725
345
5
*As on December 31, 2010
Agra Bypass
33
457
Opportunities for Investment Under NHDP Phase III *
91
S. No. Road Section
Length
(Km)
(INR Crore)
Estimated Project Cost
(USD Million)
1
Bhopal-Bareily,Bareily-Rajmarg
Crossing,Rajmarg Crossing-Jabalpur
290
2,755
551
2
Nagpur-Wainganga Bridge
45
432
86
3
Beawar-Pali &Pali-Pindwara
244
2,319
464
4
Patna-Buxar
125
1,192
238
5
Madurai-Parmakoti-Ramanathapuram
116
1,100
220
6
Reegus-Sikar
44
417
83
7
Rohtak-Jind
49
462
92
8
Gopalganj-Chhapra
92
876
175
9
Khagaria-Purnea
140
1,334
267
10
Tindivnam-Krishnagiri
178
624
125
11
Barasat-Krishnagar
84
798
160
12
Ambala-Kaithal
86
300
60
13
Parwanoo-Solan
41
387
77
14
Piprakothi-Motihari-Raxaul
69
243
49
*As on December 31, 2010

20
Guidelines for Investment in Road Sector
Opportunities for Investment Under NHDP Phase III *
S. No. Road Section
Length
(Km)
(INR Crore)
Estimated Project Cost
(USD Million)
15
Krishnagar-Bahrampore
78
741
148
16
Ranchi-Jamshedpur
164
1,553
311
17
Vijayawada - Machalipatnam
65
618
124
18
UP / Haryana Border
Yamunanagar-Panchkula
108
1,026
205
19
Panikholi-Ramoli
166
1,577
315
20
Khagaria-Bakhtiyarpur
120
420
84
21
Rohtak-Hissar
97
922
184
22
Shimla-Solan
60
570
114
23
Mulbagal-Karnataka/AP Border
22
209
42
24
Thiruvananthapuram-TN/Kerala Border
43
409
82
25
Kuttipuram-Edapally
116
1,102
220
26
Solapur - Maharashtra /
Karnataka Border-Bijapur
100
950
190
27
Chandikhole-Dubari-Talchar
133
1,264
253
28
Nagapattnam-Thanajavur
77
268
54
29
Kerala/TN Border-Kanyakumari
65
618
124
30
Coimbatore-Mettupalayam
54
513
103
31
Karaikkudi-Ramanathapuram
80
280
56
32
Kota-Jhalawar
88
836
167
33
Jowai-Meghalaya/Assam Border
104
364
73
34
Rampur-Kathgodam
88
836
167
35
Barasat-Petrapole
60
570
114
36
Cherthalai-Ochira
84
798
160
*As on December 31, 2010

Guidelines for Investment in Road Sector 21
Opportunities for Investment Under NHDP Phase IV *
S. No. Road Section
Length
(Km)
Estimated Project Cost
(INR Crore)
(USD Million)
1
Yadagiri-Warangal
96
288
58
2
Muzaffarpur-Barauni
107
321
64
3
Chhapra - Rewaghat - Muzzaffarpur
75
225
45
4
Biharsharif - Barbigha -Mokama
52
156
31
5
Ekangarsarai- Jehanabad - Arwal
54
162
32
6
Maheshkhut - Saharsa - Purnea
171
513
103
7
Raipur-Dhamtari
72
216
43
8
Raipur-Bilaspur
112
336
67
9
Arang-Saraipalli-Orissa Border
150
450
90
10
Chilpi-Simga
128
384
77
11
Ghamtari-Jagdalpur
222
666
133
12
Ambikapur-Pathlgaon
85
255
51
13
Bilaspur-Ambikapur
190
570
114
14
Pathalgaon-Gumala
130
390
78
15
Punjab/ Haryana Border - Jind
70
210
42
16
Hissar-Dabwali
160
1,520
304
17
Kaithal-Haryana/Rajasthan Border
160
480
96
18
Bilaspur-Ner Chowk
54
162
32
19
Ner Chowk-Manali
119
357
71
20
Kiratpur- Bilaspur
63
189
38
21
Chas- Ramgarh
85
255
51
22
Junction with NH-2 at Govindpur-Chas-Upto JHR/WB Border
71
213
43
23
Ranchi - Birmitrapur
210
630
126
24
Ranchi- Nagar Untari
260
780
156
*As on December 31, 2010

22
Guidelines for Investment in Road Sector
Opportunities for Investment Under NHDP Phase IV *
S. No. Road Section
Length
(Km)
Estimated Project Cost
(INR Crore)
(USD Million)
25
Jamshedpur-Kharagpur
150
450
90
26
Hospet-Bellary-KNT/AP Border
93
279
56
27
Shimoga-Mangalore
188
564
113
28
Hasan-BC Road
130
390
78
29
Gulbarga-Bijapur-Homnabad
200
600
120
30
Hospet-Chitradurga
119
357
71
31
Hospet-Hubli-Ankola
271
813
163
32
Gundlupet-TN/KNT Border
27
81
16
33
Hoskote-Dobespet
89
267
53
34
Tamil Nadu/KNT Border-Bangalore
204
612
122
35
Mah/KNT Border-Sangareddy
145
435
87
36
Jabalpur- Lakhnadon
74
222
44
37
Shahganj Junction -Budhni-Betul
107
321
64
38
Obdullaganj-Shahganj
26
78
16
39
Biaora- MP/Rajasthan Border
66
198
40
40
Jabalpur-Katani-Rewa
210
630
126
41
Gwalior-Shivpuri
125
375
75
42
Shivpuri-Dewas
330
990
198
43
Jabalpur-Mandla-Chilpi
189
567
113
44
Khed-Sinner
150
450
90
45
Vedishi-Osmanabad-Solapur
85
255
51
46
Kalyan-Andhra Pradesh Border (km442 to km591)
149
447
89
47
Kalyan-Andhra Pradesh Border (km232 to km284)
51
153
31
48
Dhule-Aurangabad
140
420
84
*As on December 31, 2010

Guidelines for Investment in Road Sector 23
Opportunities for Investment Under NHDP Phase IV *
S. No. Road Section
Length
(Km)
Estimated Project Cost
(INR Crore)
(USD Million)
49
Amravati-Dhule-Gujrat Border
480
1,440
288
50
Kalyan-Andhra Pradesh Border (km 0.0 to km232)
232
696
139
51
52
Kalyan-Andhra Pradesh Border
(Km284 to km 337 Jn.with NH-211)
Kalyan-Andhra Pradesh Border
(Km 342 Jn. With NH-211 to km 442)
53
100
159
300
32
60
53
Aurandabad-Vedishi
175
525
105
54
Solapur-Mah/KNT Border
126
379
76
55
Bahargora-Sambalpur
370
1,110
222
56
Cuttak-Angul
112
336
67
57
Angul-Sambalpur
153
459
92
58
Birmitrapur-Barkote
128
384
77
59
Baleashwar-Baripada-Jharpokhria (Jn. of NH-5 with NH-6)
90
270
54
60
Sriganganagar-Rajasthan/Punjab Border
124
372
74
61
Karauli-Dholpur
72
216
43
62
Jhalawar-Rajasthan/Madhya Pradesh Border
71
213
43
63
Rajasthan Border-Fatehpur
135
405
81
64
Padhi-Dahod
85
255
51
65
Vikravandi-Kumbakonam-Thanjavur
165
495
99
66
Thanjavur - Pudukkotai - Sivaganga - Manamadurai
122
366
73
67
Tiruchirapalli-Lalgudi-Chidambaram &
Meenusuriti-Jayamkondam-Kootu Road
135
405
81
68
Viluppuram-Pondicherry-Nagapattinam
194
582
116
69
Coimbatore-TN/KNT Border
103
309
62
70
Dindigul-KNT/TN Border
266
798
160
71
Ghaghra Bridge-Varanasi
177
1,682
336
72
Indo Nepal Border-Ghaghra Bridge
122
1,159
232
*As on December 31, 2010

24
Guidelines for Investment in Road Sector
Opportunities for Investment Under NHDP Phase IV *
S. No. Road Section
Length
(Km)
Estimated Project Cost
(INR Crore)
(USD Million)
73
Meerut - Bulandshahar
66
627
125
74
Unnao - Lalganj
68
204
41
75
Varanasi-Sultanpur
142
1,349
270
76
Sultanpur-Lucknow
124
1,178
236
77
Meerut - Nazibabad
139
417
83
78
Raibareilly - Jounpur
169
507
101
79
Lucknow - Raibareilly
82
779
156
80
Ambedkar Nagar - Banda
287
861
172
81
Varanasi-Hanumanha
125
375
75
82
Barabanki-Bahraich-Nanapara-Rupaidiha
152
456
91
83
Gorakhpur-Ferenda-Nautanwa-Sonauli
99
297
59
84
MP/UP Border-Allahabad
41
123
25
85
Varanasi-Gorakhpur
206
619
124
86
Bharatpur-Mathura-Hathras
90
270
54
87
Moradabad-Aligarh
144
432
86
88
Bareilly-Sitarganj
87
261
52
89
Sitarganj-Kashipur
97
291
58
90
Kashipur-Haridwar
167
1,587
317
91
Dehradun-Chutmalpur-Roorkee
70
210
42
92
Sitarganj - Tanakpur
52
156
31
93
Chutmalpur-Saharanpur-Yamunanadar-Haryana/UP Border
50
475
95
94
95
Pundlbari - Baxirhat
JHR/WB Border-Purliya-Balarampur-JHR/WB border-upto
junction with NH-33
46
83
138
248
28
50
*As on December 31, 2010

Guidelines for Investment in Road Sector 25
Opportunities for Investment Under NHDP Phase V *
S. No. Road Section
Length
(Km)
Estimated Project Cost
(INR Crore)
(USD Million)
1
Ahemadabad-Vadodara
102
1,023
205
2
Walahajapet -Poonamallee
93
930
186
3
Barwa Adda-Panagarh
123
1,229
246
4
Dhankuni-Kharagpur
111
1,114
223
5
Kishangarh-Udaipur-Ahmedabad
557
5,570
1114
6
Vijaywada-Elluru-Rajamundry
198
1,980
396
7
Ichhapuram-Srikakulam-Anandpuram
213
2,130
426
8
Chandikhole-Paradeep
80
800
160
9
Ludhiana-Chandigarh
85
850
170
10
Agra-Etawa Bypass
125
1,250
250
11
Allahabad Bypass-Varanasi
160
1,600
320
12
Aurangabad-Barwa Adda
220
2,200
440
13
Etawah-Chakeri
157
1,570
314
14
Chakeri-Allahabad
153
1,530
306
15
Satara-Kagal
133
1,330
266
16
Tambaram - Tindivanam
93
930
186
17
Panagarh – Palsit
64
640
128
18
Palsit-Dhankuni
65
650
130
19
Vishakhapatnam-Ankapalli
50
500
100
20
Ankapalli-Tuni
59
590
118
21
Tuni-Dharmavaram
47
470
94
22
Dharmavaram-Rajahmundary
53
530
106
23
Nellore Bypass
17
170
34
24
Khagal – Belgaum
77
770
154
25
Neelamangala-Tumkur
35
350
70
26
Tada - Nellore
111
1,110
222
27
Dharwad-Haveri
95
950
190
28
Bhubaneshwar-Icchapuram
135
1,350
270
29
Hapur-Moradabad
110
1,100
220
30
Balasore-Chandikhole
140
1,400
280
31
Haveri-Chitradurga
135
1,350
270
32
Agra-Gwalior
85
850
170
33
Tumkur & Chitrdurga Bypass
31
310
62
34
Delhi-Hapur
52
520
104
35 Kharagpur-Baleshwar
*As on December 31, 2010
116
1,160
232

26
Guidelines for Investment in Road Sector
Revenue Risks and Mitigation
Revenue realisation in BOT-Toll projects is subject to
some key risks including, but not limited to variation in
traffic, variation in toll rates,
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.
Variation in Traffic
Type of Variation
Actual Traffic <
Target Traffic
Actual Traffic >
Target Traffic
Change in
Concession Period
For every 1%
shortfall,concession
period increase by 1.5%
For every 1% excess,
concession period
8
reduction by 0.75%
additional tollway,
Cap on Concession
Period Variation
20%
10%
The concession agreement provides for extension or
reduction of the concession period in the event the
9
actual traffic falls short or exceeds the target traffic , as
10
estimated 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.
Variation in Toll rates (Linked to WPI)
The notification of the New National Highways Fee
Rules (2008) and its amendments dated December 3,
2010 and January 12, 2011 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.
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

Guidelines for Investment in Road Sector 27
The salient features of the new toll rules and its
amendments 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)
determined based on construction cost.
• Rounding off fee to the nearest five rupees (earlier
rounded off to nearest one 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 and tunnels) separately.
rate on a per passenger car unit (pcu)/km basis. The
base toll rates for other high-cost structures (such as
project cost (on INR/vehicle/trip basis).
For bypasses
constructed at a cost of INR ten crore or more, the base
toll rates are one and a half times the standard base toll
bridges and tunnels)
are indexed to the estimated
Provided below is an illustration of toll revenues
earned from a Light Motor vehicle and Multi Axle
Vehicle (MAV of more than 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
base toll rate on a pcu/km basis has been assumed to be
0.69 for a Light Motor vehicle and 3.85 for a Multi Axle
Vehicle (MAV of more than three to six axles). 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 the bypass is reflected in the toll charges.
Complete details of the new National Highway Fee
(Determination of Rates and Collection) Rules, 2008 and
its amendments dated December 3, 2010 and January
12, 2011 are provided in the enclosed CD.
Early Termination of Concession
The concession may be terminated before project
completion in the event of the following:
Old Toll Rate
Rs./ trip (USD)
11
New Toll Rates
Rs./ trip (USD)
Event of
Default
During construction
(after financial
closure)
During operations
Light Motor Vehicle
Multi Axle Vehicle
Scenario 1
88
(~1.76)
490
(~9.8)
90
(~1.8)
495
(~9.9)
Concessionaire
event of default
NHAI event of
default
Force Majeure
No payment
a. the total Debt Due
b. 150% of the Adjusted Equity.
Payment equal to 90% of debt
due less insurance claims if any.
12
Light Motor Vehicle
Scenario 2
88
(~1.76)
95
(~1.9)
Non-Political
Event
Indirect Political
13
Event
Payment equal 90%
of the Debt Due less Insurance Cover
a. Debt Due Less Insurance Cover
b. 110% of the Adjusted Equity
Multi Axle Vehicle
490
(~9.8)
540
(~10.8)
Political Event
a. the total Debt Due
b. 150% of the Adjusted Equity
11. As per new tolling rules, toll rate revision is determined by the formula - TR 1 = TR 0 (1+3%) + TR 0((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

28
Guidelines for Investment in Road Sector
• 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
• 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
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.

Guidelines for Investment in Road Sector 29
Overview of
Successful Projects
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.
Source: NHAI
Number of Contracts
BOT Toll
Awarded 130
Completed 38
BOT DBFO
Awarded 8
Completed
BOT Annuity
Awarded 42
Completed 16
10,933
1,987
1,034
2,534
948
Cost in
INR Crore USD Billion
90,706
13,951
7,785
24,087
5,721
18.1
2.8
1.6
4.8
1.1
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 BOT Project –NH 8
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.
The project was completed 5 months ahead of its
scheduled completion date (2005). 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.
Belgaum – Maharashtra Border Section of NH-4
(Annuity Project)
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.
Second Vivekananda Bridge (now Sister Nivedita
Bridge)- BOT Project in Kolkota:
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

30
Guidelines for Investment in Road Sector
financial close was delayed by one year, the
construction thereafter was almost on time and the
th
bridge 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.
Jawaharlal Nehru Port Connectivity Project in
Maharashtra
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 represented by City and Industrial
Development Corporation of Maharashtra Ltd.
(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 also
been completed. Encouraged by the results, Phase –III
at a cost of INR 279 Crore (USD 56 million), is 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.
Participation of Foreign Contractors
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 on their own 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 contractors from about 17
countries are operating in India.
Foreign companies are executing 26 contracts
exclusively and 80 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 33). 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) 28 28 3,081
BOT (Annuity) 9 9 713
EPC Contracts 67 67 3,286
Country wise breakup of Foreign and JV Companies
involved in development work of National Highway
Projects
S. No. Country
1.
2.
3.
4.
5.
6.
7 .
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
China
Dubai
Malaysia
Iran
Singapore
Saudi Arabia
UK
Indonesia
Korea
Spain
Taiwan
Thailand
Turkey
Philippines
USA
Russia
Italy
Total
JV
Contractors
12
3
26
1
1
1
4
2
9
5
-
3
2
1
1
8
1
80
Independent
2
-
10
-
-
-
-
2
5
-
4
1
-
-
-
2
-
26

Guidelines for Investment in Road Sector 31
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
construction provided the project involves
addition of new lanes.
• 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:

32
Guidelines for Investment in Road Sector
• Detailed Feasibility Study
• 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.
Government Support for Major Clearances required for Road Projects
CLEARANCES
CLEARING AUTHORITY
Cost Estimate
Techno economic 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
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
families
Ministry of Road Transport & Highways, State Governments and NHAI

Foreign Direct Investment
(FDI) Policy
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
40
30
Net Foreign Investment (in billion $)
Net Direct Foreign Investment
Net Portfolio Foreign Investment
29.5
32.2
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
20
10
12.5
3.0
7.7 7.0
15.4
17.5
19.7
limited extent), atomic energy and activities/sectors
not opened to private sector investment.
0
The major source of FDI in India is through the equity
route, which accounted for approximately 65% of the
total FDI inflows in India during the period April 2000
to November 2010.
Routes For Foreign Direct Investment
-10
-20
Source: RBI
-14.0
2005-06 2006-07 2007-08 2008-09 2009-10
Investment Climate – FDI Current Situation
FDI
Automatic Route
No prior government approval required
Prior Permission (Foreign Investment
Promotion Board)
Decision generally within 4–6 weeks
FDI equity limit-Automatic Route (illustrative list)
• Roads -100%
• Insurance – 26%
• Domestic airlines – 49% (100% for NRI investment)
• Telecom services – Foreign Investment 74% (FDI upto 49%
under the automatic route)
• Private sector banks – 74% (upto 49% is under the
automatic route)
• Exploration and mining of coal, lignite, diamonds and
precious stones – 100%
• Development of new airports – 100%
• Development of existing airports – 100% (upto 74% is
under the automatic route)
FDI Requiring prior approval (illustrative list)
• Defence production -26%
• FM broadcasting – Foreign investment 20%
• Print media / news and current affairs - 26%
• Broadcasting – cable, DTH, setting up of hardware facilities-
Foreign equity 49% (Ceiling of 20% for FDI in DTH)
• E-commerce activities - items sourced from small scale
sector & test marketing – 100%
• Single brand retailing 51%
• Banking - Public Sector FDI and Portfolio Investment upto
20%
Other areas (100% - Auto Route): Pharma, Non Banking Financial Services, SEZs, Food Processing

34
Guidelines for Investment in Road Sector
• 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.

Guidelines for Investment in Road Sector 35
Tax Environment
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
Direct Taxes
Central
Personal Income Tax
Wealth Tax
Taxation in India
Indirect Taxes
Customs Duty
Excise Duty
State
Other Taxes
Professional Tax
Indirect Tax
Value Added Tax
Entry Tax
Rates of Taxation
Domestic Companies
• Taxed at worldwide income
• Taxed at 30%
• If taxable income > INR
10,000,000; Surcharge
applicable @ 7.5% of tax.
• Education cess of 3% of tax
(and surcharge if applicable)
• Dividend Distribution Tax
(DDT) is levied @ 16.609%
on the amount of dividend
declared.
Foreign Companies
• 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)
Corporate Tax
Central Sales Tax
Octroi
Direct Taxation
Service Tax
Tax incentive for Roads
100% tax holiday is available for those who are
engaged in development or / and operation and
maintenance 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 18% 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.
Minimum Alternate Tax (MAT)
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 provision is less than MAT.
In such a case, companies are liable to pay 18% of book
profits as MAT plus applicable surcharge of 7.5% for
domestic companies 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 are computed by making prescribed
adjustments to the net profit disclosed by the
corporations in their financial statements.

36
Guidelines for Investment in Road Sector
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.
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:
Dividend Distribution Tax (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 16.609%
(i.e. inclusive of surcharge and education cess) on
• 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 37
Withholding tax
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.
Requisite Challan
• Tax withheld has to be deposited in Form ITNS-281. With
effect from April 1, 2008 all corporates will have to pay tax
electronically.
• In case the tax is paid or credited in the month of March, the
same can be deposited by April 30.
Quarterly statement
• Payment to residents and non residents: Quarterly statements for
withholding tax are to be filed on or before July 15, October 15,
Jan 15 and May 15.
Withholding tax certificate
• Certificate in Form no. 16A to be issued to the payee within 15
days from the due date for furnishing the statement of tax
deducted at source.
• Certificate in Form 16 for tax withheld on salary to be issued
annually by May 31 of the financial year immediately following
the financial year in which income was paid and tax deducted.
Determination of Taxable Income
Profit / Loss
as per
Accounts
Deduct taxes already paid to
arrive at net taxes payable /
refundable
Is amount
positive?
Y
Net taxes payable
Add: Expenses Disallowed
as per Income Tax Act and
considered in accounts
Tax payable is equal to tax
under normal provisions
Y
N
Net taxes refundable
Less: Expenses Allowed
as per Income Tax Act but
not considered in accounts
Is Tax payable
under normal
provisions higher
than tax payable
under MAT?
N
Tax payable is
equal to tax
under MAT
provisions
Apply applicable tax rates
(including Surcharge & Education
Cess) to the taxable income to
arrive at gross tax payable under
normal provisions.
Calculated tax payable
under ‘Minimum alternate
Tax’ (MAT) provisions

38
Guidelines for Investment in Road Sector
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
Double Taxation Avoidance Agreements (DTAA) is provided below.
List of countries with which India has a DTAA
Armenia
Denmark
Jordan
Namibia
Serbia
Trinidad and Tobago
Australia
Egypt
Kazakhstan
Nepal
Singapore
Turkey
Austria
Finland
Kenya
Netherlands
Slovenia
Turkmenistan
Bangladesh
France
Korea
New Zealand
South Africa
UAE
Belarus
Germany
Kuwait
Norway
Spain
Uganda
Belgium
Greece
Kyrgyz Republic
Oman
Sri Lanka
UK
Botswana
Hungary
Libya
Phillippines
Sudan
Ukraine
Brazil
Iceland
Malaysia
Poland
Sweden
USA
Bulgaria
Indonesia
Malta
Portuguese Republic
Swiss Confederation
Uzbekistan
Canada
Ireland
Maruitius
Qatar
Syria
Vietnam
China
Israel
Mongolia
Romania
Tanzania
Zambia
Cyprus
Italy
Morocco
Russia
Tazakhistan
Czech Republic
Japan
Myanmar
Saudi Arabia
Thailand

Guidelines for Investment in Road Sector 39
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.
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
15
from payment of Customs duty on fulfillment of
prescribed conditions including:
i
ii
The goods are imported by Ministry of Road
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
A person who has been named as a subcontractor
in the contract between NHAI and
the principal contractor for construction of
roads
Rate
14
10%
10.3%
• 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%.
3%
4%
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 subcontractor
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
14. Capital goods can be imported at the general rate of 7.5 % .
15. Notification No. 21/2002-Cus, dated March 1, 2002.

40
Guidelines for Investment in Road Sector
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 10.3% (Basic Excise Duty 10%, 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.
Service Tax
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 formation, clearance, excavation, earth
moving and demolition services
• Works contract services
• Management, maintenance or repair services
Incentives/Exemptions
Construction / maintenance 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,
16
earthmoving and demolition services
• Works contract services
• Management, maintenance or repair services.
Value Added tax ('VAT')
VAT is a state specific levy on sale of goods within the
17
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 Sales Tax ('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 April 1,
2010. GST is now slated to be introduced with effect
from April 1, 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 transaction would attract Integrated GST
(IGST) which would be 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.
16 Notification No. 17/2005-ST, dated 7 June 2005
17 Some states have increased the rate

Guidelines for Investment in Road Sector 41
Repatriation of Investments and
Profits Earned in India
Type of Income streams
Dividend
Interest
Royalty
Technical
Fees
Rates of
taxation
Domestic law
(a)
NIL
Best treaty
rate 5%*
Domestic law
20%*
Best treaty
rate 10%*
Domestic law
10%*
Best treaty
rate 10%*
Domestic law
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 16.609% of the dividend declared.
* the above rates are exclusive of surcharge and education cess.
Ministry of Commerce and Industry vide Press Release dated November 5, 2009 has permitted payments for
royalty, lumpsum fee for transfer of technology, payments for use of trademark/brand name under automatic
route.
• 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 from fresh
Dividends are not allowed as deduction. Royalty/ fee for technical services/ interest are allowed as
deduction subject to transfer pricing norms

42
Guidelines for Investment in Road Sector
Repatriation of capital
Buy back of shares
Redemption of
preference share
Capital Reduction
Liquidation of company
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. 609% would be payable on coupon on
preference shares.
• 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 c k . 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 @16.609% 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.

Guidelines for Investment in Road Sector 43
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
State Highways
Major District Roads
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 Public Works Departments ( PWDs)
State PWDs
State capitals and tier 1 cities
Union capital, state capitals, major ports,
strategic locations
State capitals, district centres, important
towns, national highways, other states
State Capitals, district centres,
important towns, national highways
Rural and Other Roads
Ministry of Rural Development (MoRD)
Production centres, markets, highways,
railway stations etc
Project Roads
State PWDs/Project Organisations
Projects like irrigation, power, mines, etc
Urban Roads
Municipal Corporations
Intra city networking
Village Roads
Zilla Parishads/State Governments
Villages, district roads, highways,
railway stations, riversides etc

44
Guidelines for Investment in Road Sector
Administrative Framework for Roads
Institutional Advisory Framework
Facilitated by
Committee on Infrastructure
Planning Commission
Finance Ministry/PPP Cell
Central Level
MoRTH
(allocation of funds for the development and
maintenance of highways)
MoRD
(allocation of funds for the development
and maintenance of rural roads)
Department of Road
Transport & Highways
NHAI
(NHDP implementation,
operations and
maintenance)
Planning, Policy
and Budgeting
Secretary
Panchayat Raj
State Level
State PWD
(NH-Wing)
State PWD
State Highways
MDRs,ODRs, Village
Roads
Rural Redevelopment
& Panchayat Raj
(Rural Roads)
Road Development Corporations
(Construction, Maintenance and
Operation of Roads)

Guidelines for Investment in Road Sector 45
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 February 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 more than USD
60 billion National Highways Development Project
(NHDP) has been managed by the NHAI under the
mandate of the Ministry of Road Transport &
Highways (MoRTH), Government of India.
• Situation where Central Government will have
powers to override NHAI and its officials
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 :
Chief General Manager (Finance)
Phone : + 91(011)-25074100 & 25074200, Extn : 1330
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

46
Guidelines for Investment in Road Sector
Organisation Structure of NHAI is set out below:
NHAI CORPORATE
OFFICE
NHAI
Technical Finance Administration
Project
Management
Corridor
Management
NHAI FIELD
OFFICES
Project
Implementation Unit (PIU)
Corridor
Management Unit (CMU)
The administrative framework at the Head Office is set out below
Chairman
Central Vigilance
Officer
Member
Finance
Member
Administration
Member
Technical (1)
Member
Technical (2) &(3)
Member
PPP
CGM (Finance)
CGM (HR &
Admn)
CGM (LA)
CGM (IT)
CGM (CM)
CGM (Legal)
CGM (S R&D)
CGM (Safety)
CGM (Technical)-
(2) & (3)
CGM (PQ)

Guidelines for Investment in Road Sector 47
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. National Highways Fee (Determination of Rates and Collection) Rules, 2008
9. National Highways Fee (Determination of Rates and Collection) Amendment Rules, 2010
10. National Highways Fee (Determination of Rates and Collection) Amendment Rules, 2011
11. Motor Vehicles Act
12. NHAI Act, 1988
13. Environment Protection Act
14. Manual and Specification for 6-laning
15. Manual and Specification for 4-laning
16. Manual and Specification for 2-laning
17. Road Transport Policy
18. Reserve Bank of India Policy

Useful Addresses
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
Ministry 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
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/
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