For Office Use:

Grade

PUBLIC FINANCE
Individual Assignment on

PPP project
Vadodara Halol Toll
Road (VHTR)

Submitted To:Prof. Naresh Poturaju

Submitted by:Nidhi Mehta (151431)

Institute of Management, Nirma University

Date of Submission: 14th March, 2016

Vadodara Halol Toll Road

Project Description
The Vadodara Halol Toll Road (VHTR) was one of the first State Highway widening projects
developed on a Public Private Partnership basis in India. VHTR was an initiative commissioned
as a part of the Vision 2010 an infrastructure master plan developed by the Government of
Gujarat (GoG). The underlying principle of the vision was to develop infrastructure projects in
Gujarat by attracting private sector participation. The project involved widening and
strengthening of 32 kilometers (km) of the existing two-lane State Highway (SH 87) connecting
Vadodara to the industrial town of Halol into a four-lane tolled expressway.

Need of Vadodara Halol Toll Road (VHTR) Project

The VHTR project has been a flagship project by the Gujarat government for
fulfilling its Vision 2010- an infrastructure master plan developed by the
government, which consequently paved way for similar projects being undertaken
by the governments in the rest of India. The underlying principle of the vision was to
develop infrastructure projects in Gujarat by attracting private sector participation.
To fulfil the requirement of transportation roads the project was undertaken. To fulfil
the need to connect the industrial area of Halol, one of the fastest growing industrial
corridor to Vadodara and further connect to other industrial corridors in the state.

Valuation of the project and its financial information

The cost of the project was INR 161 crores of which the construction cost accounted for
approximately INR 119 crores. IL&FS appraised and syndicated the project. Equity of ` 67.9
crores was raised from GoG, IL&FS, American Insurance Group, and the consortium of
contractors. IL&FS also raised debt of ` 93.2 crores through various Indian financial
institutions including Industrial Development Bank of India, Infrastructure Development and
Finance Corporation (IDFC), State Bank of India, and other lenders. IL&FS also provided the
subordinate debt.
IL&FS (to the extent of ` 10 crore) and IDFC (to the extent of ` 20 crore) together provided
credit enhancement in the form of an irrevocable take-out option through purchase of Deep
Discount Bonds issued by VHTRL.

Financial Information of VHTR project

Government of
Gujarat
Debt

World Bank &

Equity

Concession
Agreement
INR 93 crores

INR 67.9
crores

IL&FS

IL&FS
VHTRL

Banks

Govt. of
Gujarat

Financial
Institutions

Loan
Agreement

Shareholding
Agreement

O&M Operator

Govt. of

Financial

Gujarat

Institutions

O&M
Agreement
O&M Operator

Holding patterns/partnership structure

Particulars

Amount (INR cr.)

Amount (INR cr.)

Equity
GoG equity
IL & FS
GoG Preference
AIG
Punj Llyod Ltd
Consortium of Contractors
Total equity

5.00
15.00
10.00
10.00
15.00
12.90
67.90
Debt

Subordinate loans
Term loans
Deep discount bonds
Total Debt

10.00
65.83
30.00
105.83

Financial benefits to the Government

Particulars

Amount (INR cr.)

(2012-2013)

Amount (INR cr.) (2011-

2012)

Income
Expense
Profit before Tax
Provision for Tax

42.527
21.268
21.259
(3.794)

45.025
21.561
23.464
9.855

Profit/(Loss) after tax

17.465

33.319

The given table gives the information about the financial benefits from the undertaken project.
However, what share Government is getting from the profit is not disclosed. Assuming that profit
sharing is basis on the equity holding; Government would have earned INR 7.36 Cr. and INR
3.86Cr. in 2011-12 and 2012-13 respectively as government hold 22.09% of total equity
(15/67.90). But these are the only benefits generated from the toll tax collected by VHTR
operation authority. There are also some implied financial benefits that are not been counted. For
example, because of VHTR project lot of business has grown significantly in Halol as well as
Vadodara and so increase in collection of taxes from these industrial units and so.

Benefits to the people at large

VHTR project has not only beneficial to industrial players but also been very useful to the
residents of nearby areas also. Better connectivity of road ensures the time reduction in travels
and also increased employment opportunity by setting up restaurant or hotel business in roadside
area. Apart from that VHTR project was designed in such a way that connects further to SH-87
and became part of it. Thus it also been beneficial for the people for long travels or journey. In
order to minimize the negative impacts and to enhance the community benefits 550 trees were
planted along the road, a noise barrier at sensitive receptors was provided and water bodies in
two project villages were deepened. VHTRL also undertook voluntary relocation of temples,
schools, and environmental infrastructure. It implemented its environmental and social
management plan by creating wetlands, complying with emission norms, and hazard
management for local communities as part of its rehabilitation measures. It also created
additional facilities such as pedestrian subways and compound walls and provided additional
houses for the relocation of communities.

Economic impact of the project

There were several economic impact of VHTR project. It paved a way for the giant industrial
players to invest more in the Gujarat especially in Halol G.I.D.C, one of the biggest industrial
area of Gujarat. After the completion of a project several giant companies established their
manufacturing plant such as TOTO, General Motors, Mekastar Safety Valves, CEAT tyres,
SETCO, ALSTOM, Schneider Electric etc. and worlds biggest two-wheeler manufacturer

HERO Motocorp is establishing its manufacturing unit in Halol. Thus, VHTR project has helped
Gujarat in bringing huge private investment in state as well as employment opportunity.
Apart from the private investment in the state, the project was designed such that it helps in
building cross drainage system and helped in improvement in horticulture aspects. VHTR project