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Public–Private Partnerships in Roads Sector: A Study of Two Urban Road Projects in India

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Handbook on Public Private Partnerships in Transportation, Vol II

Part of the book series: Competitive Government: Public Private Partnerships ((CGPPP))

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Abstract

Public–Private Partnership (PPP) is deployed in road and highway development across the world. Following the global trend, India also deployed the PPP in its highway development program, which also includes the development of urban arterial roads. However, whether such urban road development PPP projects are successful is largely an empirical question. This chapter is an attempt to examine whether such urban arterial road projects developed under PPP are successful not only in terms of “cost-time-quality” metrics but also in terms of other project features like strategic planning, detailing, and implementation. It makes a case-comparative analysis of two urban arterial road projects located in two different metropolitan cities in India, which used the PPP into ring road development in a different manner. The study finds that while the strategic planning of urban ring road projects is essential for their success, such projects also require careful project planning (including financing) as well as process management (especially, land acquisition management) for them to become successful. There are more risks in urban arterial road development projects under PPP that affect the timely execution of projects while also leading to cost overruns. Although the PPP ring road projects are costlier and have more risks in execution, they offer better project outcomes such as superior built quality of asset to become “value for money.” The experience of both the urban road PPP projects in India, however, also underlines the importance of institutional capacity and adequate finances. The choice of appropriate PPP model is also important to achieve project success.

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Notes

  1. 1.

    Fuel cess is mobilized through the levy of a fixed charge on every unit of fuel consumption (petrol and diesel) in the country that is raised at the time of fuel sale at the outlets.

  2. 2.

    There is a revival of Engineering, Procurement, and Construction (EPC) model, a modified contracts type of PPP, in the recent times with the loss of attraction and appetite for BOT models.

  3. 3.

    There are several risks associated with the PPP projects, which are categorized into (a) internal or contractual risks, (b) external or non-contractual risks. It is this larger set of risks that makes the PPP projects vulnerable to cancelations or stalling or failure (Kalidindi & Thomas, 2002).

  4. 4.

    A comparative analysis involves comparing similar subjects, i.e., projects, areas, and economies. Comparative analysis is attempted recently in infrastructure sector as well, e.g., Shaikh and Narain (2011).

  5. 5.

    Whereas AMC is the local government responsible for urban services within the city, the AUDA is an urban authority whose jurisdiction falls outside AMC limits and extends into the larger region. The jurisdiction of AMC is spread over 409.39 sq. km and that of the AUDA covers 1866.53 sq. km area outside AMC limits.

  6. 6.

    The National Highways Fee (Determination of Rates and Collection) Rules, 2008, later replaced the NHAI Act, which specify the base rate of fee in terms of Rs per km length of road way for different categories of vehicles—light vehicles (car, jeep, van), light commercial vehicle, bus or truck, heavy vehicles or multi-axle load vehicles, and over-sized vehicles. It also gives a formula for revising the rate or fee to current level by using the WPI.

  7. 7.

    For example, suppose a 60-acre TPS that covers a stretch of ring road and adjoining areas has 10 land owners with an equal holding area, i.e., 6 acres. Let the value of each land holding before TPS is Rs 2 mn per acre or Rs 12 million per each holding. If the ring road stretches over 5 acres of land, then the remaining area of holdings reduces to 5.5 acres per holding. But, with the land price rising by 9% after construction of roadway, the value of the holdings will rise to Rs 2.18 mn per acre and total value remains unchanged at Rs 12 million even after a reduction in the total land holding by each land owner. Loss of land is compensated by gain in land value due to the creation of an infrastructure asset like road way.

  8. 8.

    While HMA is the metropolitan area governed by the HMDA, the central city of Hyderabad is governed by the Greater Hyderabad Municipal Corporation (GHMC).

  9. 9.

    The NORR project also envisaged the development of 33 Radial Ring roads in 4/6/8 lanes (including the widening of some existing roads) during both the phases.

  10. 10.

    The final cost estimates were pegged at Rs 6.99 billion ($107.54 mn) and Rs 67 billion ($1030.77 mn) for Phase I and Phase II, respectively (GoAP, 2012).

  11. 11.

    In fact, the Land acquisition and Rehabilitation & Resettlement Bill, 2013, came much later, but it is comprehensive in coverage in terms of the assessment of compensation and R&R.

Abbreviations

AMC:

Ahmedabad Municipal Corporation

AUDA:

Ahmedabad Urban Development Authority

BOOT:

Build, Own, Operate, and Toll/Transfer

BOT:

Build, Own and Toll/Transfer

BRTS:

Bus Rapid Transit System

DP:

Development Plan

DPR:

Detailed Project Report

EPC:

Engineering, Procurement, and Construction

FDI:

Foreign Direct Investment

GHMC:

Greater Hyderabad Municipal Corporation

GoAP:

Government of Andhra Pradesh

GoI:

Government of India

HGCL:

Hyderabad Growth Corridor Limited

HMA:

Hyderabad Metropolitan Area

HMDA:

Hyderabad Metropolitan Development Authority

JICA:

Japan International Cooperation Agency

JV:

Joint Venture

LAA:

Land Acquisition Act

MCA:

Model Concession Agreement

MRTS:

Mass Rapid Transit System

NH:

National Highway

NHAI:

National Highways Authority of India

NHDP:

National Highways Development Programme

NORR:

Nehru Outer Ring Road

PDF:

Project Development Fund

PPP:

Public–Private Partnership

QA:

Quality Assurance

QC:

Quality Control

R&R:

Rehabilitation & Resettlement

RoW:

Right of Way

SEZ:

Special Economic Zone

SH:

State Highway

SLNC:

State Level Nodal Committee

SPPR:

Sardar Patel Ring Road

SPRRIL:

Sardar Patel Ring Road Infrastructure Limited

SPV:

Special Purpose Vehicle

TOT:

Toll, Operate, and Transfer

TPS:

Town Planning Scheme

VFM:

Value For Money

VGF:

Viability Gap Fund

WPI:

Wholesale Price Index

$ 1 (US dollar):

₹ 65 (Indian Rupee)

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Authors and Affiliations

  1. School of Projects, Real Estate and Infrastructure Management, National Institute of Construction Management Research, Pune, Maharashtra, India

    Ramakrishna Nallathiga

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  1. Ramakrishna Nallathiga
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Correspondence to Ramakrishna Nallathiga .

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Editors and Affiliations

  1. Professor of Economics and director of the Center for Competitive Government in the College of Liberal Arts at Temple University, Philadelphia, PA, USA

    Simon Hakim

  2. Environmental Engineering & Public Health Consultant, Cincinnati, OH, USA

    Robert M. Clark

  3. Professor of Economics andmember of the Center for Competitive Government at Temple University, Philadelphia, PA, USA

    Erwin A. Blackstone

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Nallathiga, R. (2022). Public–Private Partnerships in Roads Sector: A Study of Two Urban Road Projects in India. In: Hakim, S., Clark, R.M., Blackstone, E.A. (eds) Handbook on Public Private Partnerships in Transportation, Vol II. Competitive Government: Public Private Partnerships. Springer, Cham. https://doi.org/10.1007/978-3-031-04628-5_6

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