GAMMON INDIA LIMITED

Annuity: The developer receives periodic payments on a yearly or six-monthly basis from the Government,
for a period of up to 15 years. The developer has to maintain the road for this period, and then transfer it to
the Government at zero cost. In this system, the Government NHAI collects tolls and the contractor‘s
returns are independent of traffic volumes or toll rates. The bidding variable for such projects is the amount
of annuity quoted.
Grant: This variant is a hybrid of the toll-based and annuity systems: the Government pays a capital grant to
make up for the difference between the BOT operator‘s return expectation and toll revenue. The grant is
capped at 25.00% to 40.00% of the required funds, and may be either a one-time payment, or spread over a
period of up to 10 years, depending on the project. The bidding variable for such projects is the amount of
the capital grant. Source: http://nhai.org/roadnetwork.htm
Policy Initiatives for Attracting Private Investment
The Government has taken several initiatives to encourage private investment in roads. Some of the key
initiatives are as follows:
The Government to carry out initial preparatory work including land acquisition and utility
removal. Rights of way to be made available to concessionaires free from all encumbrances.
NHAI/Government may provide capital grant of up to 40.00% of the total project cost to enhance
viability on a case to case basis.
Tax benefits under Section 80 IA of the Income Tax Act, 1961.
Concession periods are generally allowed up to a maximum of 30 years.
Duty free import of specified modern high capacity equipment for highway construction.
The Government has approved 100.00% foreign direct investments for road and highway
construction through the automatic route.
The Planning Commission, NHAI and Ministry of Road Transport and Highways have initiated
steps to modify the draft concession agreement to mitigate the traffic risks of toll based projects –
concession agreement will be extended or reduced based on actual traffic.
National Highways Development Programme (“NHDP”)
In 2000, the Government initiated the NHDP, in an effort to improve highway infrastructure. The two key
arterial highway network upgrade programmes initiated in 2000 are now referred to as Phases I and II
respectively. A summary of the current plan to improve the national highway or other road networks, as
outlined in the Government‘s present first year performance review document is set out below:
Golden Quadrilateral: The Golden Quadrilateral is a project connecting four metro cities, with a total
length of 5,846 kilometers. The total cost of the project is Rs.300.00 billion, funded largely by the
Government‘s special petroleum product tax revenues and Government borrowings. Approximately 97.98%
of the Golden Quadrilateral had been completed as of June 30, 2009.
North-South East-West Phases I & II: North-South and East-West corridors comprise national highways
connecting four extreme points of the country. The total length of the network is over 7,300 kilometers. As
of June 30, 2009, 3,762 kilometers of the project had been completed, while 2,648 kilometers remains under
construction and 732 kilometers remain to be awarded.
Phase III A and B: The Government approved NHDP-III to upgrade 12,109 kilometers of national highways
on a BOT basis, which takes into account high-density traffic, connectivity of state capitals via NHDP
Phase I and II, and connectivity to centers of economic importance. As of June 30, 2009, 890 kilometers of
the project had been completed, while 2,037 kilometers remains under construction and 9,181 kilometers
remain to be awarded.
Phase IV: The Government is considering widening 20,000 kilometers of highway that are not part of Phase
I, II, or III. Phase IV will convert existing single lane highways into two lanes with paved shoulders. The
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