GAMMON INDIA LIMITED

Development Authorities, Metro Rail Corporations amongst others. These agencies’ investment budgets are
included in the Government's Five-Year Plans. The Five-Year Plans are a key tool of the Government in its
economic planning. The plans are developed, executed and monitored by the Indian Planning Commission.
The 10th Five-Year Plan (the “10th Five-Year Plan”) related to the period from 2002 to 2007. The 11 th
Five-Year Plan (the “11th Five-Year Plan”) relates to the period from 2007 to 2012. The following table
sets forth the planned levels of infrastructure and construction investment in various sectors under the 10 th
and 11th Five-Year Plans during the respective periods:
(Source: Planning Commission, XI 5-Year plan)
Funded Infrastructure Development
Many construction projects in India are funded by the Government, state government or by governmental
organizations. Projects commonly developed through this development model include irrigation systems,
electrification and highways. Contracts are entered into for the construction and operation of the projects
being developed. Funded construction projects typically fall into one or more combinations of the following
categories:
Lump sum or turnkey contract, which provides for a single price for the total amount of work,
subject to variations pursuant to changes in the client’s project requirements. The client supplies all
the information relating to the project, including designs and drawings. Based on such information,
contractors are required to estimate the quantities of various items, such as raw materials, and the
amount of work that would be needed to complete the project, and then prepare a bill of quantities
(“BOQ”) to arrive at the price to be quoted.
Item rate contract, which is a contract in which the price of each item is presented in a BOQ
furnished by the client. In item rate contracts the client supplies all the information, including the
design, drawings and a BOQ.
Percentage rate contract requires a contractor to quote a percentage above, below or at par with the
estimated cost furnished by the client. In percentage rate contracts, the client supplies all the
information such as design, drawings and BOQ with the estimated rates for each item of the BOQ.
These contracts typically contain price variation or escalation clauses that provide for either reimbursement
by the client in the event of a variation in the price of key raw materials, or a formula that links the
escalation in amounts payable by the client to pre-defined price indices published periodically by RBI or the
Government. In contracts that do not include such price variation or escalation clauses, the contractor faces
the risk of the increase of prices of key raw materials and other inputs during the project execution period.
Public Private Partnership Model (PPP)
The following table shows the percentage of PPP model used in different sectors:
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