NOIDA TOLL BRIDGE

INTRODUCTION

One of the 3 bridges across Yamuna riverconnecting Delhi with Noida with the other two being the Nizzamudin Bridge and ITO bridge.

IL&FS, NOIDA and the Delhi Administration signed a memorandum of understanding on 7 April 1992 for the construction and operation of the Delhi Noida Toll Bridge.

The Noida Toll Bridge Company Limited (NTBCL) was incorporated on 8 April 1996.

The Concession Agreement (CA) for implementation of the project on a BOOT basis was executed by the three parties i.e. IL&FS, NTBCL & NOIDA in 1997.

552.5 meter long…. Capacity – 222000 vehicle being accommodated in 8 lanes.The first intra urban bridge implemented in India on a PPP basis.Established the concept of SPV for project recourse financing.Project was completed within budget and time.Only toll in the country listed on the stock exchange.

WHAT ARE THE RISKS INVOLVED FOR NOIDA TOLL BRIDGE?

CAPITAL STRUCTURE The total cost USD 100 mn. Debt equity mix of the 70% and 30% Equity includes a public issue of FCCBs. The total funding requirement of the project

of US dollar 91.8 mn (Rs 408.2 cr)was financed through equity financing of USD27.5 million(Rs 122.4 Cr) and debt financing of USD 64.3 mn(285.8 Cr).

The world bank also participated in the financing of the project through a line a credit granted to ILLFS .

SOCIAL BENEFITS OF NOIDA TOLL BRIDGE

Why government has sanctioned the project

-Time saving( up to 40 mins)

-distance saving(up to 6 kms)

-Safety and convenience

-Excellent riding quality

-Reduction in pollution and congestion

WAS GOVERNMENT JUSTIFIED IN ENTERING SUCH A LIBERAL AGGREMENT?

The contract doesn’t put a cap on the project costThe components of the cost were not definedThe agreement doesn’t provide a tight definition of what items are allowable as costsAuditors can certify that specified expenditures are occurred butThey can’t opine upon whether these expenditures are reasonableThe total cost of the project which qualifies for an assured return of 20% per annum,includes short falls in the recoveryOf returns in previous financial yearsThere was no incentive to minimize cost

WHAT ARE THE KEY ASPECTS OF CONCESSION AGGREMENT?

The concession agreement (CA) signed between NOIDA, IL&FS, and NTBCL in 1997 for the Delhi Noida bridge project grants the concessionaire (NTBCL) the right to collect user fees to recover (a)the total cost of the project, as well as (b) returns on the total cost of the project at a rate of 20% per annum, over the concession period7 starting from the effective date. (c)The return on the total cost of the project is guaranteed in that the contract provides that the concession period will be extended by NOIDA in two-year increments beyond the 30 year initial concession period8 until such time as the total cost of the project and the returns thereon have been recovered by the concessionaire.

Key aspects of the concession agreement are discussed below.Guaranteed returns on total project cost

Development Rights

Termination payments

Multiple roles of the sponsor

Independent Auditor and Independent Engineer

Selection of Project Oversight Board

Fees

WHAT ARE THE LOOP HOLES OF THE CONCESSION AGGREMENT?

After India faced economic sanctions for conducting nuclear tests, it was nearly impossible for govt to raise funds for infrastructure projects.

The PPP contracts were zero at that point of time.

During 1990 Noida developed at a faster rate.

The traffic between Delhi and Noida was increasing at an alarming rate.

IS LPRV METHOD BETTER ALTERNATIVE?

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