Roads 0610

State of the Industry June 2010
Sections
1.0 Roads network in India B-1

- Extensive road network B-1
- Roads account for 53 per cent of total freight traffic B-1
- Higher passenger traffic on roads than railways B-2
- Upgradation of highways from double lane to four lanes B-3
2.0 Legal, institutional and policy framework B-5

- Institutional framework B-5
- Policy framework B-6
- State government policy B-10
- Legal framework B-12
- Ownership B-13
3.0 Road Construction Activity B-13

- Road construction process B-15
- Construction equipments used in roads B-16
- Types of Roads B-17
- Earthwork B-17
- Granular sub-base B-18
- Wet mix macadam B-18
- Bituminous layers B-18
- Cost of bituminous layers is highest in total cost of flexible
- pavement B-18
- Rigid or cement pavement B-19
- Cement layers of a rigid pavement B-19
- Cost comparison between flexible and rigid pavement B-21
4.0 National Highways B-17

- National Highway Development Programme B-23
5.0 State Highways B-27

- State roads B-27
- Comparison across states B-27
- Implementing agencies in Rajasthan B-27
- Project mix in Rajasthan B-28
- Size of projects B-28
- Upcoming state road projects in Rajasthan B-28
- Implementing agencies in Madhya Pradesh B-29
Continued
CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW A-i

Continued
- Project mix in Madhya Pradesh B-30

- Upcoming state road project in Madhya Pradesh B-31
- Implementing agencies in Karnataka B-31
- Project mix in Karnataka B-32
- Upcoming state road projects in Karnataka B-33
- Implementing agencies in Gujarat B-33
- Upcoming state road projects in Gujarat B-34
- Implementing agencies in Maharashtra B-35
- Upcoming state road projects in Maharashtra B-36
6.0 Rural roads B-37

- Pradhan Mantri Gram Sadak Yojana B-37
7.0 Player track record B-39

- Players track record in NHDP projects B-39
- Project profile of players B-39
Charts
2.0 Legal, institutional and policy framework

01 Road sector - Institutional arrangement at the Central and state level B-5
3.0 Road Construction Activity

01 Road construction activity B-15
02 Flexible or bituminous pavement B-17
03 Rigid or cement pavement B-19
Figures
1.0 Roads Network in India

01 Freight traffic across mode of transport - 2000-01 (810 btkm) B-2
02 Freight traffic across modes of transport - 2009-10 - (1,606 btkm) B-2
03 Passenger traffic Roads vs railways B-2
Continued
A-ii CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW

continued
4.0 National Highways

01 Trend in national highway network B-23
5.0 State Highways

01 Project mix in Rajasthan state roads B-28
: 02 Project mix in MP state roads B-30
03 Project mix in Karnataka state roads B-32
7.0 Player track record

01 Rural roads Year-wise break-up of length constructed B-37
02 Rural roads Year-wise break-up of investment B-37
5.0ighways B-27
Tables
1.0 Roads Network in India

01 Road network in India as in 2008-09 B-1
02 Percentage of national highways in terms of width B-3

01 New tolling policy B-9
02 Comparison of policies across states B-11

01 Cost break up of bituminous layers B-18
02 Cost break up across layers B-18
03 Cost components of DLC B-20
04 Cost components of PQC B-20
05 Cost break up across layers B-20
06 Cost break up in flexible pavement B-21
07 Cost break up in rigid pavement B-21

01 NHDP phases B-24
02 NHDP status (as on February 28, 2010) B-24
5.0 State Highways

01 Rajasthan - Road network (as of March 2005) B-27
02 Average size of projects B-28
03 Upcoming projects in Rajasthan state roads B-29
04 Madhya Pradesh - Road length (as of March 2006) B-29
Continued
CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW A-iii

continued

06 Upcoming projects in Madhya Pradesh state roads B-31
07 Karnataka - Road network (as of March 2005) B-31
09 Upcoming projects in Karnataka state roads B-33
10 Gujarat - Road network (as of March 2006) B-33
12 Upcoming projects in Gujarat state roads B-34
13 Maharashtra - Road network (as of March 2006) B-35
14 Average ticket size of projects B-35
15 Upcoming projects in Maharashtra state roads B-36
7.0 Player track record

01 Players track record in NHDP projects B-40
02 Average time overrun in cash and BOT contracts B-42
03 State-wise- Time overrun for NHDP projects B-43
A-iv CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW

1.0 Roads network in India
Extensive road network

India has the second largest road network in the world, aggregating 3.3 million km. Roads form the most preferred
mode of transportation in the country, accounting for about 86 per cent of passenger and 53 per cent of freight
traffic. National highways, with a length of around 70,000 km, though constituting a mere 2 per cent of the road
network, carry about 40 per cent of the total road traffic. On the other hand, state roads and major district roads -
the secondary system of roads, carry another 40 per cent of traffic and account for 18 per cent of road length.
Table 1: Road network in India as in 2008-09

Road netw ork Length Percentage of total Coordinating Connectivity to
(km ) Length Traffic agency
National highw ay 70,548 2.1 40.0 MoST, BRO Union capital, state capitals, major
ports, foreign highw ays
State highw ay 128,000 3.9 40.0 State PWDs Major centres w ithin the states,
national highw ays
Major district roads 470,000 14.2 State PWDs Main roads, rural roads
Rural and other roads 2,650,000 79.9 20.0 MoRD Production centres, markets,
highw ays, railw ay stations etc
- Project roads - - - State PWDs Projects like irrigation, pow er,
mines, etc
- Urban roads - - - Municipal Intra-city netw orking
corporations
- Village roads - - - Zilla parishads Village to nearby markets
Total 3,318,548 100.0 100.0

Source: MoRTH, NHAI, CRISIL Research
Roads account for 53 per cent of total freight traffic

Road transport is most frequently used mode for both freight and passengers. It is estimated that 53 per cent of the
total freight and 87 per cent of the total passenger traffic is carried by roads. In 2000-01, roads accounted for 47
per cent of the total freight traffic, which increased to 53 per cent in 2009-10. Comparatively, the railways, which
contributed 39 per cent in 2000-01 to the total freight transport, declined to 36 per cent in 2009-10.
CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW B-1

Figure 1: Freight traffic across mode of Figure 2: Freight traffic across modes of
transport - 2000-01 (810 btkm) transport - 2009-10 - (1,606 btkm)
(per cent)
(per cent)
Coastal
5
Coastal Pipeline
Pipeline 7 Road 7
8 47
Rail Road
36 53
Rail
39
Btkm: Billion tonnes per km Source: CRISIL Research

Note
For details, please refer to CRISIL Researchs
report, Domestic Freight Transportation Service
Source: CRISIL Research
Higher passenger traffic on roads than railways
Figure 3: Passenger traffic Roads vs railways
82
85 87
72 72
64
51
49
36
28
28
29
18
13
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2004-05 P
Road Passengers Railway Passengers
P: Projected
Source: Working Group Report on Road Transport for the Eleventh Five-Year Plan
Since 1950-51, the passenger traffic for railways has declined from 85 per cent to 13 per cent, while passenger
traffic for roads has consistently grown from 30 per cent in 1950 -51 to 87 per cent in 2004-05.
Preference for road transport for freight movement is primarily on account of large capacity expansions carried
out by fleet operators, flexibility and door-to-door movement. In addition, roads are a primary means for last mile
travel. Further, there are several players in road transport while the Indian Railways is the only player in railways.
B-2 CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW

Upgradation of highways from double lane to four lanes
Table 2: Percentage of national highways in terms of width

Width of carriageway National highways National highways National highways
length (2004-05) length (2007-08) length (2008-09)
(km) (per cent) (km) (per cent) (km) (per cent)
Four-lane 5,901 9.0 9,325 14.0 12,053 17.1

Two-lane 36,719 56.0 39,079 58.5 37,646 53.4
One-lane 22,949 35.0 18,350 27.5 20,849 29.6
Total 65,569 100.0 66,754 100.0 70,548 100.0
Source: MoRTH
National highways have been upgraded from single lane and double lane to four lanes. Single lane roads
decreased from 35 per cent in 2004-05 to 30 per cent in 2008 -09, whereas double lane roads have reduced from
56 per cent to 53 per cent during the same period. Between 2004-05 and 2008-09, four lane roads have increased
from 9 per cent to 17 per cent.

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Institutional framework
At the Central government level, there are several line ministries for transport planning, coordination and policy
setting, with the Planning Commission tasked with overall coordination.
Chat 1: Road sector - Institutional arrangement at the Central and state level
Planning Commission
(overall policy framework, integration, approval plans)
MoRTH MoRD
(release and allocation of funds for (release and allocation of funds for
development and maintenance of national development
highways) and maintenance of rural roads)
Road dept
Central level
NHAI
(NHDP implementation, operations and maintenance)
(Planning, policy and budgeting) Secretary

(Panchayat Ra j)
State PWDs for roads-national State PWD for roads

highway wing (construction and maintenance of Panchayat Raj engineering dept
(construction and maintenance state roads and rural roads (for construction and maintenance
of national highways) [for some states] ) of rural roads in some states )
Road Development Corpn

State level
(construction, maintenance and operation of roads )
In June 2009, the Ministry of Shipping, Road Transport and Highways (MoSRTH) was segregated into two
ministries - Ministry of Road Transport and Highway (MoRTH) and Ministry of Shipping and Ports (MoSP).
At the Central level, the Planning Commission, in consultation with MoRTH and the Ministry of Rural
Development (MoRD), prepares the overall policy, programme development and resource planning. MoRTH's
duties relate to the development and maintenance of national highways, and policies on road transport.

Implementation, operation and maintenance of national highways is the responsibility of NHAI. NHAI was
constituted and operationalised in February 1995; it was given the status of an autonomous corporate body under
the control of MoRTH.
At the state level, the overall policy, programme development and resource planning is carried out by the state
planning cell in consultation with the Planning Commission and the states roads ministry.
State PWDs and road development corporations are the agencies at the state level implementing, operating and
maintaining state highways, major district roads and rural roads in most of the states. Apart from state PWDs, the
Panchayati Raj also implements the construction and maintenance of rural roads. MoRD is responsible for policy
development as well as monitoring and coordination of rural roads.
The ministries allocate and release funds for the development of roads to the respective implementing agencies.
Policy framework
Central government policy

Key policy measures for private participation
In order to encourage and facilitate private sector investment and participation in the roads sector, the Central
government has undertaken policy measures and provided fiscal incentives within the sector:
100 per cent foreign direct equity investment (FDI) will be allowed in road sector projects
Dispute resolution will be in line with the Arbitration and Conciliation Act 1996, based on UNCITRAL
provisions.
Key parameters of New Model Concession agreement and bidding process

(includes recommendations from the BK Chaturvedi Committee report)
Concession structure - NHAI projects

New Model Concession Agreement (MCA) for BOT toll-based projects has been prepared. The MCA identifies
risks and specifies the terms and conditions for risk sharing between the private player and the government.
Awarding of contracts
As per the recommendations of the BK Chaturvedi Committee, future road projects would be awarded on BOT
toll, BOT-annuity and cash contracts concurrently, and not subsequently.
Bidding variable to be the grant expected from NHAI

The selection of the concessionaire, under the new MCA, is based on open competitive bidding. All project
parameters such as the concession period, toll rates, price indexation and technical parameters are clearly stated
upfront. Pre-qualified bidders are required to specify only the amount of grant sought by them. The bidder who
seeks the lowest grant is awarded the contract. In some cases, instead of seeking a grant, a bidder may offer to
share project revenues with the NHAI. In this case, the bidder offering the highest revenue share wins the
contract.

Grant
The maximum grant provided will be 20 per cent of the project cost. In case the grant is inadequate for making a
project commercially viable, an additional grant up to a maximum of 20 per cent of the project cost is to be
provided. As per recommendations of the BK Chaturvedi Committee, the entire grant would be disbursed to the
concessionaire during the construction period
Concession fee (premium)

As per the recommendations of the BK Chaturvedi Committee, concession fee is the amount concessionaire
agrees to share with the NHAI out of the revenues of road project on the date of commercial operations date
(COD). The premium would increase by 5 per cent in each year of the concession period.
Concession period
The concession period is typically 20 years, but may vary depending on the volume of existing and projected
traffic for specific projects.
Partial traffic risk mitigation provisions

The provisions provide for an increase in the concession period by 1.5 per cent (subject to a maximum of 20
per cent) for every 1.0 per cent of shortfall in traffic. While provision that provides for reduction in the
concession period on increase in traffic has been removed in the interest of road players and bankers.
Modification in the termination clause

As per recommendations of the BK Chaturvedi Committee, in case the daily passenger car units (PCU),
traffic exceeds the design capacity of a stretch in a year, then at NHAIs discretion, a detailed project report
(DPR) would be prepared for augmenting capacity of the stretch, yielding an assured equity IRR of 16 per
cent to the concessionaire. Also, a maximum extension in concession period to the extent of 5 years would be
allowed.
Construction period
The time required for construction (typically 24-30 months) is included in the concession period. A concessionaire
starts earning revenues from COD. This incentivises the concessionaire to complete construction ahead of
schedule.
Financial closure
A time limit of 180 days is set for achieving financial closure by the concessionaire. In the event of failure, the bid
security is forfeited.
The NHAI has introduced an additional condition for bidding road projects. Developers would be barred from
bidding for new projects if three or more NHAI BOT projects are pending financial closure. However, if a bidder
convinces NHAI about surety of arrangement of funds for the project, it can bid for more projects.

Conflict of interest
As per the recommendations of the BK Chaturvedi Committee , common shareholding or other ownership interest
in companies has been increased from 5 per cent to 25 per cent of the paid up and subscribed share capital.
Obligations of NHAI
As per the recommendations of the BK Chaturvedi Committee, the obligations of NHAI are: (i) to acquire and
hand over possession of 80 per cent of land required for the project till the letter of award (LOA) and balance 20
per cent to be handed over within 90 days of project award; (ii) obtain all environmental clearances for the project
before financial closure is achieved; (iii) NHAI will ensure that no competing road is constructed where NHDP is
being implemented. NHAI will have to compensate the concessionaire if this is breached.
Exit policy
As per the recommendations of the BK Chaturvedi Committee, during the construction period, the concessionaire
should hold at least 51 per cent of equity stake in a road project. However, the equity stake can be reduced to 26
per cent 2 years from COD of the project.
Substitution
MCA provides for the concession to be transferred to another company in the event of failure of the
concessionaire to operate the project successfully.
Technical capacity
As per recommendations of the BK Chaturvedi Committee, the technical capacity of a developer should be
equivalent to the project cost of a particular road project.
Toll charges and revision in toll rates

New Tolling Policy (2008)
Toll charges are based on the rates notified by the government. The New Tolling Policy came into force in
December 2008 with effect from April 1, 2008. The key parameters in the policy are:

Table 1: New tolling policy
Parameters New tolling policy (2008)
with effect from April 1, 2008
Categorisation of vehicles 5 types
Increase in base rate Rs per km
- Car/jeep/vans 0.65
- LCV 1.05
- Truck/bus 2.20
- MAV 3.45
- Oversized vehicles 4.20
Methodology for revision in toll rates Fixed 3 per cent + 40 per cent of
change in WPI
Tolling rates for 2-laned national highways 60% of toll

rates of 4-laned national highways
Tolling of permanent bridges, If cost > Rs 0.5 bn then tolled
bypasses or tunnels separately
Source: MoRTH, CRISIL Research
Other features in the policy include:

Uniform rates for public and private funded projects
Categorisation of vehicles in five different types
Change in base rates for four or more laned national highways
Introduction of toll rates for two-laned national highways
A permanent bridge, bypass or tunnel will be tolled separately and excluded from the length of the national
highway if the cost is Rs 0.5 billion or more
Proposed changes in policies

Financial capacity
Currently, the bidder/consortium is required to have a net worth equivalent to at least 25 per cent of the project
cost. As per the proposed norm, for projects up to Rs 20 billion, the consortium will need to have net worth of 25
per cent of the capital cost of the project. For projects between Rs 20 billion and Rs 30 billion net worth
requirement will be of 50 per cent of the capital cost of the project. The company implementing projects beyond
Rs 30 billion will need to have net worth equivalent to the project cost.
Short-listing in request for qualification stage

Based on the technical and financial capacity of the applicant, bidders would be short-listed and qualified for the
request for proposal stage (RFP) for submitting the financial bids. It has been proposed that around eight bidders
for projects worth Rs 20 billion would be short-listed for the RFP stage, and for projects over Rs 20 billion around
10 bidders would be short-listed.
Fiscal incentive for road developers

Under section 80 IA of the Income Tax Act, profits and gains derived by an undertaking are subject to a 100
per cent deduction for 10 consecutive assessment years out of the 20 years, beginning from the year in which
the undertaking begins to operate the business provided such profits and gains are derived from the business

of: (i) Developing, (ii) Operating and maintaining or (iii) Developing, operating and maintaining a road
including, toll road, a bridge; a highway project including housing or other activities being an integral part of
the highway project
Deduction up to 40 per cent of the income from financing of the infrastructure projects is available provided
the amount is kept in a special reserve
Subscription to equity shares or debentures issued by public company wholly and exclusively for the purpose
of the developing, maintaining and operating an infrastructure facility is eligible for deduction equal to 20 per
cent of the amount subscribed
On certain identified high quality construction plants and equipments, import duty has been completely
exempted for public funded needs
Import of bitumen is now permitted under Open General Licence
External commercial borrowings are permitted up to 35 per cent of the project cost
Funding for NHAI

In addition, as NHDP is implemented by NHAI, it is also entitled to:
To raise funds under capital gains tax exemption for NHAI bonds under the IT Act, Section 54 EC
Funds allocated from the Central Road Fund (from cess collection on petrol and diesel) are provided to the
NHAI.
State government policy

States such as Maharashtra, Madhya Pradesh, Gujarat, Rajasthan, Karnataka, amongst others, have set up State
Road Development Corporations (SRDCs) for the development and implementation of projects. In order to
encourage private sector participation states such as Maharashtra, Rajasthan, Bihar, Punjab, Haryana follow their
own MCA.

Table 2: Comparison of policies across states
Maharashtra Gujarat Madhya Rajasthan Karnataka NHAI
Pradesh
Model Concession Agreement
Grant
Max 40% - Max 40% Max 40% Max 40% - Max 40% - Max 40% -
50% during 100% 100% 100% payment
construction payment payment during
and 50% as during during construction
O&M support construction construction period
period period
Land acquisition
100% of land Min 50% - 100% of - Min 80% of
acquisition of land land land acquisition
with in 30 acquisition acquisition till LoA
days from till financial with in 90
LoA closure days from
LoA
Tolling policy
Revision of rates Base rate * Base rate Base rate Base rate Base rate Base rate *3%
6% *3% + *100% *10% *100% + (40% change
(40% change in change in WPI)
change in WPI in WPI
WPI), in line
with NHAI
Once in 2
Once in 3 years Every year Every year Every year Every year
years
Bidding process
Selection citeria
Financial capacity - Minimum net Minimum Minimum Minimum Minimum net
worth net worth net worth net worth worth should
should be should be should be should be be 25% of
25% of 26% of 25% of 15% of project cost
project cost project cost project cost project cost
Technical - More than 100% of More than 100% of Equivalent to
capacity 100 % of project cost 100% of project cost project cost
project cost project cost
Shortlisting 3 pre- No cap on No cap on 7 pre- No cap on No cap on

qualified shortlisting shortlisting qualified shortlisting shortlisting
bidders are bidders are
shortlised shortlised
Source: Maharashtra PWD, Gujarat R&B, Madhya Pradesh PWD, Rajasthan PWD, Karnataka PWD, MoRTH

Legal framework
Central level initiatives

Administration of roads has to go hand-in-hand with the jurisdiction of the Central government and state
government. Some of the legislations governing the roads sector are:
Indian Tolls Act, 1851

This Act enables the government to levy tolls on public roads and bridges within certain rates. Certain states have
modified this Act to enable toll collection by private investors in road projects.
Land Acquisition Act, 1894

The Act empowers the Centre or state governments, and its agencies, to acquire land required for the construction
of highways, by paying compensation.
Dispute Settlement Act, 1940

Any dispute between the government and a domestic enterprise has to be settled through arbitration as per the Act.
A dispute between the government and a foreign enterprise has to be settled either in accordance with the Dispute
Settlement Act, 1940 or in accordance with the provisions of the United Nations Commission on International
Trade Laws (UNCITRAL).
National Highway Act, 1956

Legislations about national highways are as per the National Highways Act (NHA), 1956. The NHA authorises
the Central government to notify any highway as a national highway, and also assigns it the responsibility of
developing and maintaining national highways. The NHA also provides for de-notification of a national highway.
The portion of a national highway falling within the municipal limits of a town with a population of more than
20,000 is automatically de-notified. For all other roads, the planning and coordinating agency is the state PWD,
which acquires the land required for road construction under the Land Acquisition Act, 1894.
Motor Vehicle Act, 1988

It is a Central legislation that consolidates and rationalises the various laws regulating road transport in the
country. The levy of road usage charges on the vehicles is governed by either the respective motor vehicle tax acts
or equivalent acts.
States such as Maharashtra, Gujarat, Madhya Pradesh, Haryana, Uttar Pradesh, West Bengal, Rajasthan,
Karnataka, Andhra Pradesh and Tamil Nadu have amended the Motor Vehicles Act to provide a legal basis for
involving the private sector in the development of highways on BOT basis.
National Highway Authority of India Act, 1988

The National Highways Authority of India (NHAI) Act was passed in 1988. The Act provides for the constitution
of an authority for the development, maintenance and management of national highways in India. The Act
specifies that the principal function of the authority would be to develop, maintain and manage national highways

(or any other highway) entrusted to it by the Central government. The functional profile of NHAI, as envisaged in
the Act, includes:
Surveying, developing, maintaining and managing national highways and related facilities
Regulating and controlling the movement of vehicles on these highways
Collecting fees/charges on behalf of the Central government
The 1995 amendment to the NHA, 1956 permits:

Assignment of the responsibility to the private developer for the implementation and operation of projects for
a specified period through a concession agreement
Collection and retention of toll by the developer for the usage of the highway for meeting construction,
maintenance, management, operational expenses, interest on the borrowings raised, and a reasonable return on
investment
Regulation and control of the traffic on the private sector (BOT) highways by private parties
Punishment to any person encroaching and misusing the highway developed by private parties
Central Road Fund Act, 2000

The Central Road Fund (CRF) was created based on the Central Road Fund Act, promulgated in November 2000.
Revenues from cess (at the rate of Rs 2 per litre) on petrol and diesel production and imports accrue to CRF (cess
on petrol has been in effect from June 1998 and on diesel from March 1999 which was revised in 2003-04 and
further in Union Budget 2005-06). The cess is routed through the Consolidated Fund of India to CRF. The fund is
non-lapsable (cannot be merged into the consolidated fund of the Central government).
State level initiatives

To stimulate private sector participation in roads project, several state governments have taken favourable
initiatives such as making appropriate amendments to the Motor Vehicles Tax Act (Gujarat, Maharashtra,
Rajasthan and Karnataka), the Indian Tolls Act (Madhya Pradesh and Andhra Pradesh) and enacting infrastructure
development acts (Andhra Pradesh and Gujarat).
Ownership
The government usually owns the roads; it also has the right to develop and maintain them. However, in case of
BOT projects, the right to develop, maintain, collection and retention of tolls [known as RoW (Right of Way)] is
given to the concessionaire of the project. However, even in such cases the ownership of the roads is not
transferred to the concessionaire. These projects are transferred back to the government at the end of the pre-
determined concession period.

Road construction process
Chart 1: Road construction activity
Excavation and filling w ork
Subgrade: Native soil, portland

Compressing the subgrade cement and quicklime
Placing the base course on Base course: Gravel or

the subgrade crushed stone (aggregates)
Surface course: Asphalt

Placing the surface course on
concrete or portland cement
top of base course
concrete
Excavation and filling work

Geographic obstacles need to be first addressed to create a continuous right-of-way and have grades (slope or
gradual inclination) low enough to facilitate vehicle or foot travel. After removing the geographic obstacles, the
process of removing the earth and rock commences. This is usually carried out by digging or blasting. This stage
also involves construction of embankments, bridges, and tunnels and removal of vegetation.
Subgrade
Once the above activities are completed, the native soil, known as the subgrade, is compacted. Weak soils may be
stabilised with additives such as portland cement and quicklime, or dug out and replaced with imported soils.
Base course
Then a base course consisting of gravel or crushed stone (aggregates) is usually placed on the subgrade and
compacted.
Surface course
After constructing the granular sub-base, a surface course, consisting of asphalt concrete or portland cement
concrete, is placed on top of the base course. This surface course strengthens the pavement structure by spreading
out the vehicle loads applied to the subgrade

Construction equipments used in roads
Roads sector is expected to record robust growth in the near future. This growth, in turn, is likely to translate to
strong demand for road construction equipments.
Today, a contractor has the option of meeting his equipment requirements either by buying the equipments from
the equipment manufacturers or hiring the equipments on a lease or rental basis. The strong and continuous
growth in roads sector has allowed most of the bigger players to own substantial portion of their equipment
requirements. On the other hand, smaller players, on account of lack of funds, often have to meet their
requirements by either buying second-hand equipment or by hiring equipment on rental basis from equipment
banks like Quipo.
In this section, we have put together various types of road equipments, along with their main functions that are
used in roads construction in India.
Crawlers excavators and tractors

These are mainly used in the process of earthmoving and excavation. An excavator is generally used for
digging of trenches, holes, foundations, and at times for carrying out demolitions and other times for general
grading/landscaping. Excavators are usually employed together with loaders and bulldozers. Excavators
typically come in different sizes to meet the requirements of the contractor. The crawler excavator and
tractors have common uses. However, excavators are generally put to use in difficult terrains where
substantial earth-removing process is involved, whereas tractors are more likely to be used in the flat terrain
regions. Major road construction equipment players in this segment are L&T Komatsu and Telco
Construction Equipment Co Ltd.
Loaders
Loaders are used mainly for trenching, ditch cleaning, uploading materials into trucks, clearing rubble, and
digging. A loader (front loaders), though used for digging, cannot replace the excavating machines as it
cannot dig below the level of its wheels. Therefore, loaders are not classified as earthmoving machinery. They
can be easily transported as they are tyre-mounted, unlike tracked excavators, which have to be dissembled
and reassembled. There is one distinct variant of the loaders family, called backhoe loader. Backhoe loaders
can be used for activities such as digging holes/excavating, breaking asphalt, and paving roads. Major road
construction equipment players in this segment are JCB India Ltd and L&T Case Equipment Ltd.
Tippers/dumpers
These are new generation trucks that carry materials, sand, aggregates, etc and dump at the desired location.
Tippers and dumpers perform the same functions. Usually dumpers have a larger carrying capacity (35-50
tonnes) than tippers that carry weights between 5 to 10 tonnes. The major road construction equipment player
in this segment is Bharat Earth Mover Ltd.
Pavers
A paver is an engineering vehicle used to lay asphalt on roadways. A roller is subsequently used to press the
hot asphalt mix, resulting in a smooth, even surface.

Road roller
These equipments are used to compact dirt, gravel, concrete, and asphalt in the construction for roads and
foundations. Road rollers are also used in landfill compaction. There are two types of rollers - static rollers
and tandem roller. The major road construction equipment player in this segment is L&T Case Equipment
Ltd.
Motor graders
Graders are commonly used in road construction to prepare the base course to create a wide flat surface for
the asphalt to be placed on.
Scrapers
The scraper pulls up roadway, crushes it and loads it into a heavy truck. Any other debris left behind by the
scraper is then taken away by a front loader.
Types of Roads
Flexible or bituminous pavement
Chart 2: Flexible or bituminous pavement

Roadw ay
Width Bituminous concrete (BC)
Carriagew ay Dense Bituminous Macadam (DBM)
Wet mix macadam (WMM)

Sub-base
Subgrade
Earthw ork
Source: Indian Road Congress (IRC), CRISIL Research
The bituminous or flexible pavement is made up of:

1. Earthwork
2. Granular sub-base (GSB)
3. Wet mix macadam (WMM)
4. Dense bituminous macadam (DBM)
5. Bituminous concrete (BC)
Earthwork
Earthwork involves excavation and disposal of materials necessary for the construction of a pavement. It forms
the bottom layer of a flexible pavement. The depth of the earthwork activity could vary from 200-500 mm.
Materials used in levelling the ground surface are aggregates (soil, rocks and clays), which constitute 60 per cent
of the total cost of the layer. Other costs include labour and miscellaneous costs.

Granular sub-base
The GSB layer is laid after the earthwork activity. It consists of laying and compacting aggregates such as stones,
soil, sand, small size metals, etc. The thickness of this layer varies as per the design of the pavement. However,
for our analysis we have considered a thickness of 200 mm. The cost of this layer varies from Rs 800-1,500 per
cubic metre. Out of the total cost involved in this layer, 80 per cent constitutes aggregate cost, 10 per cent labour
cost and 10 per cent hiring charges.
Wet mix macadam

WMM is laid over the GSB. This layer involves the binding of various materials such as stone aggregates,
moorums, dust and sand. The thickness of this layer varies from 200-300 mm, and is priced at Rs 1,000- 3,000 per
cubic metre. The main cost component in this layer is aggregate cost, contributing 60 per cent to the total cost of
the layer. Other costs include labour and miscellaneous costs.
Bituminous layers
Bituminous layers comprise DBM and BC. BC is the top-most layer in a flexible pavement. DBM comprises
coarse aggregates and bitumen while BC consists of fine aggregates and bitumen. The proportion of bitumen is
more in BC than in the DBM layer. The thickness of both layers varies from 50-200 mm, depending upon the
design of the pavement. Cost of both layers range between Rs 4,500-6,500 per cubic metre.
Table 1: Cost break up of bituminous layers Table 2: Cost break up across layers
Components % of pavement cost Components % of pavement cost
Bitumen cost 38% Bituminous layers (BC+ DBM) 65%

Aggregate cost 25% WMM 18%
Labour cost 13% Sub grade + embankment 17%
Hiring charges 13% Total 100%
Others 13% Source: CRISIL Research, Industry sources
Total 100%
Source: CRISIL Research, Industry sources
Cost of bituminous layers is highest in total cost of flexible pavement

The high cost of bitumen in the bituminous layers (BC and DBM) of a flexible pavement makes the layer costlier
than layers such as WMM and GSB. Bitumen cost contributes around 38 per cent of total cost of bituminous
layers (BC and DBM). As a result, BC and DBM comprises around 65 per cent to the total cost of the flexible
pavement while WMM and GSB contribute 18 per cent and 17 per cent, respectively.

Rigid or cement pavement
Chart 3: Rigid or cement pavement
Roadw ay
Width Pavement quality concrete(PQC)
Carriagew ay Dry lean concrete (DLC)
Subgrade
Earthw ork
Source: Indian Road Congress (IRC), CRISIL Research
The rigid or cement pavement is made up of four layers:

1. Earthwork
2. GSB
3. Dry lean concrete (DLC)
4. Pavement quality concrete (PQC)
The composition of the bottom two layers, i.e. earthwork and GSB, in a rigid pavement is the same as in a flexible
pavement. Also, the proportion of various cost components involved in the two layers in a rigid pavement is the
same as in a flexible pavement.
Cement layers of a rigid pavement
Dry lean concrete and pavement quality concrete

DLC is laid on the GSB followed by PQC, which forms the top-most layer of a rigid pavement. DLC and PQC
consist of coarse aggregates, fine aggregates, water and cement. However, the proportion of these ingredients
depends on the design mix used, based on the specifications and design of the stretch. Various design mixes used
in DLC and PQC are M50, M40, M35, M20 and M15. For analysis, we have considered the M20 design mix for
DLC, which contains 15 per cent cement, and for PQC design mix, M35 has been considered, which contains 17
per cent cement. The thickness of both layers varies between 200-350 mm, and is in the price range of Rs 4,500-
7,000 per cubic metre.

Table 3: Cost components of DLC Table 4: Cost components of PQC
Com ponents % of pavem ent cost Com ponents % of pavem ent cost
Labour cost 25% Labour cost 16%
Cement cost 20% Cement cost 40%
Aggregate cost 20% Aggregate cost 38%
Hiring charges 30% Hiring charges 4%
Others 5% Others 2%
Total 100% Total 100%
Source: CRISIL Research, Industry sources Source: CRISIL Research, Industry sources
As the construction of DLC pavement requires sophisticated technology and equipment, hiring charges is the main
cost component. It is followed by labour cost, contributing 25 per cent to the cost of DLC. Cement and aggregate
costs contribute 20 per cent each to the cost of a DLC layer.
In the PQC layer, the main cost component is cement, as the proportion of cement used in PQC is more than the
proportion used in DLC. Cement cost constitutes 40 per cent to the total cost of the PQC layer followed by
aggregate cost.
Table 5: Cost break up across layers

Components % of pavement cost
Pavement quality concrete (PQC) 76%

Dry lean concrete (DLC) 11%
Sub grade + embankment 13%
Total 100%
Source: CRISIL Research, Industry sources
Cost of PQC layer is highest in total cost of a rigid pavement

The high cost and proportion of cement in the PQC layer makes it costlier than layers such as DLC and GSB.
Cement cost accounts for around 40 per cent of the total cost of a PQC layer. As a result, the PQC layer
contributes around 76 per cent to the total cost of a rigid pavement while DLC and GSB contribute 11 per cent
and 13 per cent, respectively.

Cost comparison between flexible and rigid pavement
Table 6: Cost break up in flexible pavement Table 7: Cost break up in rigid pavement
Com ponents % of pavem ent cost Com ponents % of pavem ent cost
Labour cost 14% Labour cost 17%
Bitumen cost 24% Cement cost 33%
Aggregate cost 40% Aggregate cost 40%
Hiring charges 9% Hiring charges 7%
Others 13% Others 3%
Total 100% Total 100%
Source: CRISIL Research, Industry sources Source: CRISIL Rsearch, Industry sources
Bitumen and cement costs main components driving cost differential in both pavement
types
Bitumen cost and cement cost are the main components driving the cost differential between a flexible pavement
and rigid pavement, as aggregate cost is relatively similar in both types of pavements. The cost of bitumen
contributes 24 per cent to the total cost of a flexible pavement, and cement cost contributes 33 per cent to the total
cost of a rigid pavement. The cost of bitumen and cement in both pavement types are, in turn, driven by bitumen
and cement prices. The cost of aggregates contributes 40 per cent to the total cost of a flexible pavement as well as
a rigid pavement. The cost of aggregates in both pavements is primarily dependent on the cost and location of the
quarry. Labour cost, as a percentage of total cost, is higher in the case of a rigid pavement since its construction
involves skilled labour. Other costs such as hiring and miscellaneous costs are higher in the case of a flexible
pavement.
Cost of a rigid pavement is higher than the cost of a flexible pavement

As per our cost analysis of rigid and flexible pavements, the cost of a flexible pavement is Rs 32.4 million per km
while the cost of a rigid pavement is Rs 38.3 million per km in 2009-10. As a result, there is an 18 per cent cost
differential between the two pavements, primarily due to the difference in bitumen and cement prices. The cost of
both pavements has been arrived at based on the composition of materials across all layers for constructing 1 km
of flexible and rigid pavements. Also, the current prices of materials have been taken in to consideration while
arriving at the cost of a flexible and rigid pavement.

The national highway network has expanded considerably since Independence. Major growth was
between 1993 and 2008, with almost 37,000 km being added to the national highway network.
Figure 1: Trend in national highway network
70,548
33,689
28,977
21,440 23,769
1948 1963 1978 1993 2008

Length (km)
Source: Eleventh Five-Year Plan, MoRTH
National Highway Development Programme

The National Highway Development Programme (NHDP) has been the key driver in expanding the countrys road
network. The NHDP encompasses upgradation, rehabilitation and broadening of existing national highways. The
programme is primarily executed by the National Highways Authority of India (NHAI), with the public works
department (PWD) of the various states and the Border Roads Organisation (BRO) also executing some stretches.
The NHDP is being implemented in seven phases. Phases II, III and V are under execution whereas
implementation under Phase VII commenced in July 2009. Phases IV and VI are at various stages of planning and
bidding.

Table 1: NHDP phases
Phases Description Implementing
agencies
I Golden Connecting Delhi-Kolkata NHAI

Quadrilateral Chennai
Port Connectivity for 10 major ports NHAI

connectivity
Others - NHAI
II North-South Shrinagar to Kanyakumari- NHAI
& East-West (North South) and Silchar to
(NSEW) Porbander- (East-West)
corridor
III Phase Connecting state capitals and NHAI
places of ecomnomic and tourist
importance
IV Improve 2- - MORTH
lane
standards
with
paved
shoulders
V 6-laning of Phase involves 5,600 km stretch NHAI
existing under GQ
national
highways
VI Expressways - NHAI
VII Ring roads - NHAI
Steady progress; 39 per cent under NHDP complete

Between March 31, 2009 and February, 28, 2010, 2,447 km under NHDP were completed. Out of the total length
under NHDP 39 per cent was completed. The total cost incurred on NHDP projects is Rs 878 billion (as on
February, 28, 2010). Further, around 20 per cent of the total stretches under NHDP are under implementation
whereas 41 per cent are yet to be awarded.
Table 2: NHDP status (as on February 28, 2010)

Unit Phase I Phase II Phase III Phase V Phase VI Phase VII Total
Total length km 7,191 7,300 12,109 6,500 1,000 700 34,800
Completed till date km 6,939 4,863 1,478 163 0 0 13,443
Completion rate as % of total per cent 96.5 66.6 12.2 2.5 0.0 0.0 38.6
Completion from Mar 31, 2009-Feb, 2010 km 231 1,464 691 61 0 0 2,447
Under implementation (UI) km 226 1,689 3,926 1,068 0 41 6,950
UI as a % of total per cent 3.1 23.1 32.4 16.4 0.0 5.9 20.0
Balance length for aw ard (BFA) km 26 590 6,705 5,269 1,000 659 14,249
BFA as a % of total per cent 0.4 8.1 55.4 81.1 100.0 94.1 40.9
Cost incurred so far Rs billion 378 353 127 20 0 0 878
Note: For the purpose of our analysis, the entire length of the North South & East West (NSEW) Corridor in Phase II and the
entire length of others national highw ays under Phase I have been considered.
Source: NHAI, CRISIL Research

Phase I - largely completed
Phase I was approved by Cabinet Committee on Economic Affairs (CCEA) in December 2000. The phase covers
7,191 km at an estimated cost of Rs 303 billion (1999 prices). This includes:
The 5,846 km Golden Quadrilateral (GQ) connecting the four major metros, viz Delhi, Mumbai, Chennai and
Kolkata
A total of 380 km connecting the major ports - Haldia, Paradeep, Vishakhapatnam, Chennai and Ennore,
Tutrocorin, Kochi, New Mangalore, Marmugoa, Jawarharlal Nehru Port Trust and Kandla - from the east
coast to the west coast and to the GQ
Other national highway stretches of 965 km
As on February, 28, 2010, around 96.5 per cent of Phase I was complete at a cost of Rs 378 billion.
Phase II - under execution

The CCEA approved Phase II, comprising the NSEW Corridor, in December 2003 at an estimated cost of Rs 343
billion (2002 prices). As per CRISIL Research, the total length of the NSEW Corridor stands at 7,300 km. As on
February, 28, 2010, around 66.6 per cent of the NSEW Corridor stood completed and a further 23.1 per cent was
under implementation. The total cost incurred was Rs 353 billion. In 2009-10, Rs 69 billion worth of projects,
totalling 210 km, were awarded. Nearly 8 per cent of the NSEW Corridor is yet to be awarded.
Phase III - future action phase

Phase III involves converting two-lane roads into four lanes. The criteria for identification of stretches under this
phase are:
High density traffic corridors not included in phases I and II
Providing connectivity of state capitals with the NHDP (phases I and II)
Connectivity of centres of tourism and places of economic importance
As on February, 28, 2010, around 12.2 per cent was complete and 32.4 per cent under implementation at a total
cost of Rs 127 billion. In 2009-10, Rs 244 billion worth of projects, totalling 2,737 km, were awarded. However,
close to 55.4 per cent of the phase is yet to be awarded.
Phase IV - To be implemented by MoRTH

Around 20,000 km of national highways are planned to be improved to two-lane standards with paved shoulders.
The CCEA approved around 5,000 km in July 2008, with the Ministry of Road, Transport and Highway (MoRTH)
tasked with the implementation of this phase instead of NHAI.
PHASE V - 87 per cent from GQ

This phase involves six-laning of 6,500 km of selected stretches of existing four-lane national highways on
design-build-finance-operate (DBFO) basis. This includes around 5,700 km of the GQ and other selected stretches
at a total cost of Rs 412 billion (2006 prices). The expenditure incurred so far on this phase is Rs 20 billion. In
2009-10, only three projects, worth Rs 29 billion, were awarded, with 81 per cent projects yet to be awarded.

Phase VI - no action on the ground
This phase includes the development of around 1,000 km of access-controlled four/six-lane divided carriageway
expressways. The Planning Commission has estimated the project to cost Rs 167 billion (based on 2006 prices).
Although this phase has been approved by the government, it is yet to see any execution on the ground. The
Vadodara to Mumbai corridor has been identified but is still in the preliminary stages.
Phase VII - initial stages of implementation

This phase proposes construction of ring roads, flyovers and by-passes on selected stretches of the national
highways at an estimated cost of Rs 167 billion. The government approved this phase in December 2007. While
700 km have been identified, stretches covering only 41 km have been awarded.

5.0 State Highways
State roads
State roads, which constitute around 18 per cent of the countrys total road network, handle around 40 per cent of
the total road traffic. State roads comprise state highways, major district roads (MDRs) and rural roads that do not
come under the purview of PMGSY. These represent the secondary system of road transportation in the country,
providing linkages with national highways, district headquarters of the state, and important towns, tourist centres
and minor ports.
Comparison across states
Rajasthan
Out of the total road network in Rajasthan, 62 per cent are surfaced roads. Within the state, rural roads account for
87 per cent of the total road network while national and state highways along with MDRs account for the
remaining 13 per cent.
Since the public-private partnership (PPP) model in road development has been well-established in Rajasthan,
policy frameworks like Model Concession Agreement, Tolling Policy and structured bidding process are in place.
Table 1: Rajasthan - Road network (as of March 2005)

Total
Road category Percentage Surfaced Length
length
(km) of total length (km) (per cent)
National highway 5,655 3.0 - -
State highway 11,594 6.1 - -
MDRs 7,328 3.9 - -
Rural roads 163,963 87.0 - -
Total 188,540 100.0 116,895 62.0
MDR: Major district road
Source: Planning Department, Rajasthan
Implementing agencies in Rajasthan

Rajasthan Public Works Department (RPWD) and Rajasthan State Road Development Corporation (RSRDC) are
the two implementing agencies for state highways and major district roads. RSRDC implements BOT contracts
and RPWD is responsible for executing cash contracts.
In 2004, the Government of Rajasthan set up the Road Infrastructure Development Company of Rajasthan Ltd
(RIDCOR), a 50-50 joint venture with IL&FS, for developing and maintaining BOT road projects. Currently, the
company is implementing a 1,200 km Mega Highway Project; the Rajasthan Government is contributing 20 per
cent of the project cost.

Project mix in Rajasthan
Proportion of BOT contracts higher than cash contracts
Out of the total completed and under implementation state road projects, 86 per cent are BOT contracts and
remaining cash contracts.
Figure 1: Project mix in Rajasthan state roads
BOT contracts
86
Cash contracts
14
Source: CRISIL Research, MP PWD, MPRDC
Local players such as Balaji Constructions, Krishna Constructions, and MS Kumar Constructions mainly execute
cash contracts in Rajasthan. Local players such as Chetak Enterprise, MSK Projects, Mitra Infra Projects and
Atlanta Constructions execute bulk of BOT contracts.
Size of projects
Average size of the project, in terms of length implemented, in Rajasthan is around 23 km in cash contracts and
125 km in BOT contracts. In terms of cost, the average size is Rs 50 million in cash contracts and Rs 1,750
million in BOT contracts.
Table 2: Average size of projects

Type of project Average size of projects
Length-wise Cost-wise
(km) (million)
Cash contracts 15-30 40-60

BOT contracts 100-150 1,500-2,000
Source: CRISIL Research, Rajasthan PWD, RSRDC
Upcoming state road projects in Rajasthan

Road projects worth Rs 13 billion are planned in Rajasthan
Mega Highways Project II has been proposed on BOT basis. Seven corridors with total length of 1,267 km worth
Rs 12,580 million have been identified. The Department of Economic Affairs has approved all seven projects
under viability gap funding to the extent of 20 per cent of project cost. RIDCOR will implement Mega Highway
Project II.

Table 3: Upcoming projects in Rajasthan state roads
Type of project Upcoming projects
Cost Length
(million) (km)
RSRDC projects
BOT-toll projects
12,580 1,267
Raj PWD
CRF projects - -
ISC projects
542 127
Total
13,122 1,394
CRF: Central road fund, ISC: Inter state connectivity
Source: CRISIL Research, RSRDC, Rajasthan PWD
Rajasthan PWD is likely to implement a total length of 127 km of cash contracts worth Rs 542 million through the
Inter State Connectivity Fund.
Madhya Pradesh
The total road network aggregates to 72,421 km in Madhya Pradesh; national highways account for 6 per cent and
state highways along with MDRs constitute 27 per cent of the road network. Almost all national highways and
state highways are surfaced in Madhya Pradesh. The state has been proactive in developing and maintaining the
road network through public as well as private sector initiatives. Policy frameworks like Model Concession
Agreement , Tolling Policy, and structured bidding process has increased private sector participation in the state.
Table 4: Madhya Pradesh - Road length (as of March 2006)

Road category Total length Percentage Surfaced length

National highway 4,286 5.9 4,286 100
State highway 8,728 12.1 99

8,679
MDRs 10,817 14.9 - -
Rural roads 48,590 67.1 - -
Total 72,421 100.0
MDR: Major district roads
Source: MPPWD
Implementing agencies in Madhya Pradesh

Madhya Pradesh Public Works Department (MPPWD) and Madhya Pradesh Road Development Corporation
(MPRDC) are the implementing agencies for state highways and MDRs. MPRDC executes most of the large-sized
BOT projects, Asian Development Bank (ADB)-funded projects and few cash contracts. MP PWD carries out
small cash contracts (20-30 km length), funded through Central Road Fund (CRF) and E&I.

Project mix in Madhya Pradesh
Proportion of cash contracts almost equal to BOT contracts

Out of the total completed and under implementation state road projects, 55 per cent are cash contracts and
remaining BOT contracts.
Figure 2: Project mix in MP state roads
BOT contracts
Cash contracts
45
55
Source: CRISIL Research, MP PWD, MPRDC
Local players execute most of the small size cash contracts; however, pan India players like Sadbhav Engineering,
Madhucon Projects, KNR Constructions, Valecha Engineering and Ramky Infrastructure have executed cash
contracts funded by ADB.
Size of projects
Average size of project, in terms of length implemented, in Madhya Pradesh is close to 45 km in cash contracts
and 120 km in BOT contracts. While in terms of cost, the average size is Rs 650 million in cash contracts and Rs
3,000 million in BOT contracts

Type of project Avg size of projects Avg size of projects
(length-wise) in km (cost-wise) in million
MSRDC projects
Cash contracts 50-80 700-1,000
BOT projects 100-130 2,000-4,000
MP PWD projects
Source: CRISIL Research, MPPWD, MPRDC

Upcoming state road project in Madhya Pradesh
Upcoming projects worth Rs 49 billion are planned in Madhya Pradesh

Total length of 427 km, worth Rs 7,996 million, is under bidding on the BOT-toll model. MPRDC has also
announced upcoming MPSRSP III projects, funded by ADB, of total length of 1,833 km. Further, cash contracts
worth Rs 4,376 billion are being planned by MPPWD.
Table 6: Upcoming projects in Madhya Pradesh state roads

Project cost Length
(Rs million) (km)
MSRDC projects
ADB projects 36,660* 1,833
regular projects - -
BOT projects 7,996 427
MP PWD projects
CRF projects 1,308 272
E&I contracts 3,068 501
Total 49,032 3,033
* Estimated
CRF: Central Road Fund, E&I : Economic and interstate connectivity fund
Source: MPRDC, MP PWD
Karnataka
The total road network in Karnataka aggregates 143,592 km, with rural roads accounting for a major share at 64
per cent. National highways and state highways account for 15 per cent of the total road network. Private sector
participation in state road development in Karnataka has lagged other states. However, a well-defined policy
framework with Model Concession Agreement, Tolling Policy and structured bidding process is in place.
Table 7: Karnataka - Road network (as of March 2005)

Road category Total length Percentage of total
(km) length
National highway 3,973 2.8
State highway 17,222 12.0
MDRs 30,975 21.6
Rural roads 91,422 63.7
Total 143,592 100.0
MDR: Major District Roads
Source: Karnataka PWD
Implementing agencies in Karnataka

Karnataka Public Works Department (KPWD) and Karnataka Road Development Corporation Ltd (KRDCL) are
the two implementing agencies for state highways and MDRs. KRDCL implements most of the BOT-toll projects.
KPWD executes all cash contracts funded through CRF and E&I fund; it is also planning to implement few BOT-
annuity projects under the Karnataka State Highway Improvement Project II (KSHIP II).
Project mix in Karnataka
Proportion of cash contracts higher than BOT contracts

Out of the total completed and under implementation state road projects, 90 per cent are cash contracts and the
remaining BOT contracts.
Figure 3: Project mix in Karnataka state roads
Cash contracts
BOT contracts 90
10
Source: CRISIL Research, Karnataka PWD, KRDCL
Local players execute most of the cash contracts while pan India players like Nagarjuna Constructions and Maytas
implement BOT contracts.
Size of projects
Average size of projects, in terms of length, implemented in Karnataka is close to 40 km in cash contracts and 70
km in BOT contracts. As per cost, the average project size is Rs 350 million in cash contracts and Rs 2,000
million in BOT contracts.

Type of project Avg size of projects
Length-wise Cost-wise
(km) (million)
KRDCL projects
Cash contracts 40-60 800-1,200
BOT contracts 60-80 1,500-2,500
K PWD projects
Source: CRISIL Research, Karnataka PWD, KRDCL

Upcoming state road projects in Karnataka
13,030 km of projects planned in Karnataka

KPWD has announced KSHIP II for improvement of state highways. The cabinet committee has identified and
approved around 3,411 km of state highways, which are currently under bidding. The projects will primarily be
funded by ABD and World Bank.
KRDCL also proposes to develop around 10,000 km of state highways along with 2,866 km of rural connectivity
on BOT- toll model. Around 9,600 km of state highways have been identified and tenders for the same have been
floated.
Table 9: Upcoming projects in Karnataka state roads

Length (km)
KRDCL projects
BOT projects 9,619
KPWD projects
BOT projects & other cash contracts 3,411
Total 13,030
Source: CRISIL Research KRCDL, Karnataka PWD
Gujarat
Almost the entire length of national highways and state highways are surfaced in Gujarat. The total road network
in the state is 85,521 km, out of which national highways account for 3.8 per cent, and state highways coupled
with major district roads make up 47 per cent of the network. Gujarat is one of the few progressive states with a
reasonable past track record for private sector participation in road development. Policy frameworks like Model
Concession Agreement, Tolling Policy, structured bidding process has increased private sector participation in the
state.
Table 10: Gujarat - Road network (as of March 2006)

Road category Total length Percentage Surfaced Length
National highway 3,260 3.8 3,260 100.0
State highway 19,163 22.4 18,833 98.3
MDRs 20,858 24.4 - -
Rural roads 42,240 49.4 - -
Total 85,521 100.0
Source: Roads and Bridges Department, Gujarat
Implementing agencies in Gujarat

Gujarat Roads and Building Department (Gujarat R&B) and Gujarat State Road Development Corporation
(GSRDC) are the two implementing agencies for state highways and MDRs. Gujarat R&B implements most of

the cash contracts. Gujarat R&B undertakes road projects, which are of economic and social importance and
require substantial viability gap funding; these are mainly BOT-annuity projects or World Bank projects. GSRDC
is a part of Gujarat R&B, undertaking mainly BOT-toll projects.
The Gujarat Infrastructure Development Board (GIDB) is another organisation enabling PPP across infrastructural
sectors in Gujarat. It is responsible for overall planning, monitoring of progress and approval of projects on the
PPP mode, based on their viability and concession agreements with detail risk allocation.
Size of projects
Average ticket size of BOT projects in Gujarat, in terms of length, is close to 100 km, and in terms of cost, it is Rs
3,000 million.

Length-wise (km) Cost-wise (million)
BOT contracts 80-120 2,000-4,000

Source: CRISIL Research,Guj R&B, GSRDC
Upcoming state road projects in Gujarat
Rs 141 billion-worth of projects planned in Gujarat

The upcoming projects of Gujarats R&B department comprise Gujarat State Highway Development Projects
(GSHDP), which envisage 5,400 km of road connectivity to important centres like special economic zones, ports,
tourist places and agricultural product markets. Currently, around five BOT-annuity projects, aggregating 637 km,
are under bidding. Close to nine BOT-toll contracts, amounting to 1,000 km, are pending (for) approval from the
government for viability gap funding. Further, GSRDC has also proposed projects worth Rs 31,409 million on
BOT basis. This total length of these projects is 1,208 km.
Table 12: Upcoming projects in Gujarat state roads

cost (million) Length (km)
GSRDC projects
BOT - toll projects 31,409 1,208
Guj R&B Projects
BOT- annuity projects 30,000 2,600
BOT- toll projects 60,000 1,000
WB-funded projects 20,000 1,800
Total 141,409 6,608
Source: CRISIL Research, Guj R&B, GSRDC

Maharashtra
Almost 78 per cent of the total road network in Maharashtra is surfaced. State highways and MDRs together
contribute close to 63 per cent to the total state road network; rural roads account for 35 per cent of the states road
network. Being an early mover into the BOT model of road projects, Maharashtra is among the few progressive
states in road development and maintenance. Suitable policy frameworks and structured bidding process has
further increased private sector participation in the state.
Table 13: Maharashtra - Road network (as of March 2006)

Road category Total length Percentage Surfaced Length
National
4,367 1.6 - -
highway
State highway 33,571 11.9 - -
MDRs 144,213 51.2 - -
Rural roads 99,279 35.3 - -
Total 281,430 100.0 219,515 78.0
Source: Maharashtra PWD
Implementing agencies in Maharashtra

Maharshtra Public Works Department (MPWD) and Maharashtra State Road Development Corporation
(MSRDC) are the two implementing agencies for state highways and MDRs. MSRDC executes projects that are
Rs 1 billion-and above. MSRDC implements all BOT contracts along with a few cash contracts. MPWD
implements most of the cash contracts.
A cabinet sub committee was formed for speedy decisions on infrastructure projects. Powers for approving PPP
projects costing up to Rs 250 million are delegated to MPWD, while powers for approving PPP projects, costing
more than Rs 250 million, are delegated to the sub cabinet committee.
Size of projects
Table 14: Average ticket size of projects

Length-wise (km) Cost-wise (million)
BOT contracts 80-120 2,000-4,000

Source: CRISIL Research, MSRDC
The average size of BOT projects, in terms of length, implemented in Maharashtra is close to 100 km, and, in
terms of cost, it is Rs 3,000 million.

Upcoming state road projects in Maharashtra
Projects worth Rs 63 billion planned in Maharashtra

MSRDC proposes to develop around 1,659 km, worth Rs 63,181 million of state highways on the BOT-toll
model. The sub cabinet committee has approved these projects; bids are expected soon.
Table 15: Upcoming projects in Maharashtra state roads

cost (million) Length (km)
BOT- toll projects 63,181 1,659
Total 63,181 1,659
Source: CRISIL Research, MSRDC, M PWD

6.0 Rural roads
Pradhan Mantri Gram Sadak Yojana

Rural roads play a vital role in the socio-economic upliftment of the rural community. Of the total 3.3 million km
road network, rural roads account for around 2.7 million km (80 per cent). Despite various efforts at the state and
Central levels, about 40 per cent of Indias villages still do not have access to all-weather roads, and remain cut-
off during the monsoons.
Pradhan Mantri Gram Sadak Yojana (PMGSY), a sub programme under Bharat Nirman, has been launched to
construct all-weather access to unconnected habitations. PMGSY estimates that 172,000 habitations would be
provided new connectivity with a road length of 365,279 km. It is also proposed to upgrade 368,000 km of
existing routes for ensuring farm-to-market connectivity.
PMGSY is a 100 per cent centrally sponsored scheme, wherein the existing sources of funding are budgetary
sources, Central Road Fund (CRF) on high speed diesel (HSD), market committee fees, loan assistance from
National Bank for Agriculture and Rural Development (NABARD), World Bank and the Asian Development
Bank. It is implemented through cash contracts.
In Union Budget 2010-11, around Rs 480 billion have been allocated for upgradation of rural infrastructure under
Bharat Nirman, whereas Rs 40 billion were allocated for rural roads in the Interim Budget 2009-10, routed
through a separate window created under the Rural Infrastructure Development Fund (RIDF). This would provide
the necessary funds for upgradation and development of rural roads planned under Bharat Nirman.
Figure 1: Rural roads Year-wise break-up of Figure 2: Rural roads Year-wise break-up of
length constructed investment
60,000 160 152

52,405
140 130
50,000
41,231 120
106
40,000 36,273
100
30,710
30,000 80 73
22,891
60
20,000
41
40
10,000
20
0 0
2005-06 2006-07 2007-08 2008-09 Till Dec 2009 2005-06 2006-07 2007-08 2008-09 Till Dec 2009
Source: National Rural Roads Development Agency Source: National Rural Roads Development Agency
Over the last 4 years (2005-06 to 2008-09), there has been a significant growth in the construction of rural roads
under PMGSY, both in volume and value terms. In value terms, there has been 55 per cent compounded annual
growth, while in volume terms the growth has been 32 per cent compounded annually. As on December 2009, Rs
130 billion has been incurred on construction of rural roads under PMGSY.

7.07.0 Player
Player
track
track
record
record
Players track record in NHDP projects

CRISIL Research analysed 19 of the largest players based on parameters such as number of projects in NHDP
executed by each player, and project size in terms of cost. These players were further evaluated on total projects
under implementation, project mix, gearing, experience in all contracts and build-operate-transfer (BOT)
contracts, average time overrun in execution of NHDP projects, and track record in terms of completion of
projects.
The total value of ongoing projects of the 19 road construction players is Rs 519 billion. Out of this, 74 per cent
are BOT-toll projects, 18 per cent cash contracts and the remaining BOT-annuity projects. Most of the ongoing
BOT-toll projects are from phases III and V, whereas cash contracts are from Phase II (NSEW Corridor).
Project profile of players
Soma Enterprise, KMC Construction and HCC have projects exceeding Rs 50 billion under
implementation
Out of the 19 players executing NHDP projects, Soma Enterprise has the maximum number of projects under
implementation in value terms. The company has projects worth Rs 93 billion under implementation, comprising
91 per cent BOT-toll contracts and 6 per cent cash contracts, with the remaining under BOT-annuity contracts.
KMC Constructions and HCC also have projects exceeding Rs 50 billion under implementation, bulk of which is
BOT-toll projects.

Table 1: Players track record in NHDP projects
Players UI Percent Percent Percentage Gearing Experience ratio Avgerage Progress
project of of of tim e
cost BOT-toll BOT- cash =UI/com pleted overrun of
annuity contracts All BOT (m onths) contracts
(m illion)
contracts contracts
Soma Enterprise Ltd 93,726 91% 3% 6% 2.7 5.4 0.1 4.0 delayed- 4
on time- 3
KMC Construction Ltd 77,653 87% 5% 7% 0.6 13.3 0.0 21.7 delayed- 2
on time- 1
Hindustan 68,348 80% 0% 20% 6.6 3.7 0.0 17.3 delayed- 6
Construction on time- 1
Company Ltd
IVRCL Infrastructure 39,405 95% 0% 5% 0.8 5.2 0.1 12.0 delayed-3
Projects Ltd on time- 0
Reliance 39,175 100% 0% 0% 0.6 11.9 0.1 7.5 delayed-2
Infrastructure Ltd on time- 0
Ideal Road Builders 34,330 92% 0% 8% 1.4 5.9 0.1 2.0 delayed- 1
Pvt Ltd on time- 1
Gammon India Ltd 30,518 13% 38% 48% 5.6 4.4 0.2 32.6 delayed- 5
on time- 0
Punj Llyod Ltd 29,943 50% 18% 32% 1.6 2.6 0.2 19.6 delayed- 5
on time- 1
GMR 26,860 100% 0% 0% 1.9 1.3 0.8 2.0 delayed- 3
on time- 3
Larsen & Toubro 20,988 100% 0% 0% 2.2 0.5 1.0 13.9 delayed- 10
on time- 6
Sadbhav Engineering 18,006 84% 16% 0% 0.6 2.7 0.0 22.8 delayed- 4
Ltd on time- 1
Gayatri Projects Ltd 9,642 42% 44% 14% 4.4 2.7 0.0 19.8 delayed- 5
on time- 0
Madhucon Projects 8,313 52% 0% 48% 0.6 1.7 0.6 14.7 delayed- 3
Pvt Ltd on time- 3
Nagarjuna 6,094 29% 21% 51% 1.9 0.8 0.4 16.6 delayed-9
Construction on time- 1
Company Ltd
Progressive 5,516 0% 0% 100% 3.5 1.3 0.0 46.1 delayed-7
Construction Ltd on time- 0
KNR Constructions 3,847 0% 43% 57% 1.6 0.7 0.7 12.0 delayed- 6
Ltd on time- 0
Ashoka Buildcon 3,561 100% 0% 0% 2.1 9.6 0.0 14.0 delayed- 1
on time- 0
Patel Engineering Co. 2,351 0% 53% 47% 0.8 0.5 0.7 11.9 delayed- 8
Ltd on time- 0
Simplex Infrastructure 692 0% 0% 100% 1.3 2.1 0.0 17.0 delayed- 1
Ltd on time- 0
Total & average 518,967 74% 8% 18% avg- 2.1 avg- 4 avg- 0.3 avg- 16.2
Experience ratio = project cost of ongoing projects divided by project cost of completed projects
Low er ratio is more favourable as it indicates higher experience in relation to the total projects under execution, completed projects >
ongoing projects
Experience ratio = 0 indicates that the player has no operational BOT projects
Progress of contracts are pertaining to all completed projects
Source: NHAI, Industry sources, CRISIL Research

Majority of the players ongoing projects skewed towards BOT contracts
More than 50 per cent of the ongoing project portfolio of players such as Soma Enterprise, KMC Constructions,
HCC, IVRCL, Reliance Infrastructure, IRB, Gammon India, Punj Lloyd, GMR, Larsen & Toubro (L&T),
Sadbhav Engineering, Madhucon Projects, Gayatri Projects, Ashoka Buildcon, and Patel Engineering are BOT
contracts. On the other hand, players like Nagarjuna Construction Company (NCC), Progressive Constructions,
KNR Constructions and Simplex Infrastructure have more than 50 of their ongoing projects in cash contracts.
Highly geared companies have high proportion of BOT contracts

HCC and Gammon India, which have the highest gearing levels at 6.6 and 5.6 times, respectively, have their
project portfolios skewed towards BOT contracts. The average delay in executing BOT projects is 5 months.
L&T, Patel Engineering, NCC, and KNR Constructions exhibit high experience ratio
Experience ratio depicts the players experience record in relation to projects under execution. A low ratio is more
favourable as it indicates high experience in relation to the total projects under execution, i.e. a higher percentage
of completed projects vis--vis ongoing projects. It also indicates the ability of the company to execute projects in
time. L&T, Patel Engineering, NCC and KNR Constructions have high proportion of completed road projects
against projects under implementation, indicating adequate experience in execution of road projects. Out of the
total 19 projects of L&T, 16 projects have been completed, out which 11 were cash contracts and five BOT
contracts. Also, companies such as Patel Engineering, NCC and KNR Constructions have completed more than 50
per cent of the projects.
Six of the 13 players have only one operational BOT project in NHDP
Out of 13 players with ongoing BOT projects, six players - HCC, IRB, KNR Constructions, NCC, Patel
Engineering and Punj Lloyd - have only one operational BOT project in NHDP. Further, the projects of these six
players have an average time overrun of 8 months in executing BOT contracts. This could delay future cash
inflows in the form of toll collections and annuities.

Table 2: Average time overrun in cash and BOT contracts
Players Avg time over run (months)
All
Cash contracts BOT contracts
contracts
Ashoka Buildcon 14.0 - 14.0
Gammon India Ltd 49.7 7.0 33.1
Gayatri Projects Ltd 19.8 - 19.8
GMR - 2.0 2.0
Hindustan Construction Company Ltd 20.0 1.0 17.3
Ideal Road Builders Pvt Ltd - 2.0 2.0
IVRCL Infrastructure Projects Ltd 17.0 9.5 12.0
KMC Construction Ltd 21.7 - 21.7
KNR Constructions Ltd 12.6 9.0 12.0
Larsen & Toubro 18.5 1.2 13.9
Madhucon Projects Pvt Ltd 20.4 3.5 14.7
Nagarjuna Construction Company Ltd 16.5 17.0 16.6
Patel Engineering Co Ltd 12.3 9.0 11.9
Progressive Construction Ltd 46.1 - 46.1
Punj Llyod Ltd 24.0 - 19.6
Reliance Infrastructure Ltd - 7.5 7.5
Sadbhav Engineering Ltd 22.8 - 22.8
Simplex Projects Ltd 17.0 - 17.0
Soma Enterprise - 9.3 4.0
Avg time overrun avg- 22.2 avg- 5.6 avg- 16.2
Majority of delays in cash contract projects

Companies such as Progressive Constructions, HCC, Gammon India, Gayatri Projects, KMC Constructions, Punj
Lloyd, Sadbhav Engineering and Simplex Infrastructure have seen delays in the majority of cash contract projects,
with an average time of 28 months. Most of the cash contracts have been delayed on account of implementation
issues like land acquisition, environmental clearances and utility shifting. However, BOT contracts have not
witnessed significant delays in execution. Average time overrun in the case of cash contracts and BOT contracts is
22 months and 6 months, respectively.

State-wise - Time overrun in completion of NHDP projects executed by 19 players
Table 3: State-wise- Time overrun for NHDP projects

States Avg time overrun (months)
Cash contracts BOT-toll BOT-annuity All contracts
Andhra Pradesh 11.4 0.5 2.7 8.0

Bihar 44.6 - - 44.6
Delhi 39.0 - - 39.0
Gujarat 8.3 1.0 3.0 6.1
Haryana 5.0 - - 5.0
Karnataka 6.5 17.0 5.3 9.0
Madhya Pradesh - 5.0 - 1.0
Maharashtra 5.0 12.0 - 6.8
Orissa 34.6 - - 34.3
Punjab - 6.0 - 6.0
Rajasthan 30.7 - - 28.7
Tamil Nadu 15.9 6.8 - 12.0
Uttar Pradesh 24.4 - - 24.4
West Bengal 19.5 - - 19.5
Total & Average avg- 20.4 avg -6.9 avg- 3.7 avg- 17.5
UI: Under implemention

Average time overrun has been calculated on completed projects
State-wise average time overrun pertains to the 19 players
Source: NHAI, CRISIL Research
Bihar, Delhi, Orissa, Rajasthan and Uttar Pradesh have maximum delays
Bihar, Delhi, Orissa, Rajasthan and Uttar Pradesh (UP) have witnessed delays of around 18 months in
implementation of NHDP projects. Projects have faced time overruns due to the adverse law and order situation.
Land acquisition and clearance issues has also led to the execution delays, particularly in states like Delhi, Bihar,
Orissa, and UP.

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State of the Industry June 2010

1.0 Roads network in India B-1

2.0 Legal, institutional and policy framework B-5

3.0 Road Construction Activity B-13

4.0 National Highways B-17

5.0 State Highways B-27

CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW A-i

- Project mix in Madhya Pradesh B-30

6.0 Rural roads B-37

7.0 Player track record B-39

2.0 Legal, institutional and policy framework

3.0 Road Construction Activity

1.0 Roads Network in India

A-ii CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW

4.0 National Highways

5.0 State Highways

7.0 Player track record

1.0 Roads Network in India

2.0 Legal, institutional and policy framework

3.0 Road Construction Activity

4.0 National Highways

5.0 State Highways

CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW A-iii

05 Average size of projects B-30

7.0 Player track record

A-iv CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW

Extensive road network

Table 1: Road network in India as in 2008-09

Total 3,318,548 100.0 100.0

Roads account for 53 per cent of total freight traffic

CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW B-1

Btkm: Billion tonnes per km Source: CRISIL Research

Higher passenger traffic on roads than railways

Figure 3: Passenger traffic Roads vs railways

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2004-05 P

Road Passengers Railway Passengers

B-2 CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW

Table 2: Percentage of national highways in terms of width

Four-lane 5,901 9.0 9,325 14.0 12,053 17.1

CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW B-3

(Planning, policy and budgeting) Secretary

State PWDs for roads-national State PWD for roads

Road Development Corpn

Source: CRISIL Research

CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW B-5

Central government policy

Key parameters of New Model Concession agreement and bidding process

Concession structure - NHAI projects

Bidding variable to be the grant expected from NHAI

B-6 CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW

Concession fee (premium)

Partial traffic risk mitigation provisions

Modification in the termination clause

CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW B-7

Toll charges and revision in toll rates

B-8 CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW

Tolling rates for 2-laned national highways 60% of toll

Source: MoRTH, CRISIL Research

Other features in the policy include:

Proposed changes in policies

Short-listing in request for qualification stage

Fiscal incentive for road developers

CRISIL RESEARCH ROADS AND HIGHWAYS ANNUAL REVIEW B-9