Friday, May 28, 2010

An Update on Indian National Highways - Part II

By no means one can doubt the govt's intent to build highways, upgrade existing ones and new expressways since 1998. Right from 1998 till now, the thrust has only been increasing. Increased private sector participation has created a momentum like never before. Yet there are some serious shortcomings on why we cannot aggressively pursue and proceed like what China is doing. Let's not forget, China too faces the same problem. However, why compare with China? Simply because China and India have some of the same problems w.r.t population density. The fact remains being a communist country, the state can virtually control everything. 

CHALLENGES or PROBLEMS and RELEVANT SOLUTIONS: (the order is the most complex first, the last is the least complex one)

1) Chinese problem was that of LAND ACQUISITION which India faces today. As China proceeded in the 1990's, it faced the legal problem of how to take land from farmers for construction of roads. This research paper gives some insightful details of how China aggressively took farmers lands for construction of highways and how several farmers have not been getting adequate compensation and participation in the post-completion of highways. In 1998, China passed compulsory Land Acquisition Act. Some of its features:

Raised compensation level to 6-10 times the annual output value of the acquired land in the preceding 3 years.
Farmers and their kids would get access to public schools and access to public goods at subsidized prices.
Other social welfare schemes such as medical insurance, pension and retirement benefits

Farmers don’t get adequate compensation as compensation guidelines are ambiguous.
What constitutes a public purpose is also undefined. Some industrialists acquire land in the name of public interest which is a violation of the law.
There is no clear definition of property rights for the farmers, village organization and land tenure.
The farmers get false promises that they would be trained in the right skills to build either the roads or new industries that may come up. But it doesn’t happen. So, in effect they lose the land, lose their income and are deprived of new skills.
The point below violates the very law of acquisition which promises better living standards for the farmers whose land has been taken

It is very clear that in developing economies like India and China planning and construction of roads began after several decades when people settled everywhere. People who understand the above table can easily understand what happens to farmers when their land is acquired at extremely low prices than prevailing in the existing market. So, while the question remains how we acquire land, India has drafted its own LAND ACQUISITION ACT way back in 1984. However, our ACT has some of the same loopholes as China. Unlike in China where land is acquired and there is no easy way out, in India farmers can go for a prolonged litigation and this litigation delays many projects. It is not that farmers do not want to give up land, it is the question of compensation. The market value/sale deed value is intentionally kept low to avoid stamp duty and hence the govt rules of compensation is too low for farmers to give up such huge tracts of land.

Farmers are interested to give up land, but there is no adequate compensation given and that is why they go to courts. Litigations prolong lot of cases. In some cases, the settlement is quick and final. 80% of cases in China too go to courts, but the govt has a way of quicker way of settling disputes unlike India which does not mandate quick resolution. China enacted such a law in 2010 and India should eventually do. CLICK HERE

Rs.8000 to Rs.10,000 CRORE worth of projects get entangled in legal disputes.

Solution: Amend the Act to use a different formula for compensation and speeden up dispute resolution.

2) Lack of Proper Funding model:

Earlier, the govt would give all the money, but as land and material prices went exponentially high, banks and other sources had to be pitched. The govt even moved to VIABILITY GAP FUNDING - wherein 40% of the money Govt would bear to pay throughout the construction period. The remaining money has to be borne by the contractors and they go in for Banks. However, banks don't trust many of the projects and builders. They consider some projects as unviable for funding.

The Govt went in and made 100% FDI in road investment to attract foreign players. Land acquisition delays continue to repel the foreign players from entry. Malaysia, UK, Canada, China and US have been asked to invest.

Solution: Govt has decided to raise money from capital gains tax exemption bonds, external commercial borrowing, infrastructure bonds, term loans and loans from agencies, banks and financial institutions

3) Lack of managerial ability - Simply speaking, this is the biggest mammoth exercise that requires great managerial skills which political system cannot consistently give.

Solution: Ensure that the right candidate can be fixed by the Govt like Mr.Shreedharan of the Delhi Metro.


1) There are so many market players ready to investment. Reliance, L&T, Sadhbav Engineering, Nagarjuna, GMR, IVRCL Tatas, Birlas, Hiranandani's etc that is pitching in crores of rupees.
2) Banks have been asked to lend more money.
3) Lot of policy hurdles have been removed. They are listed below:

Road developers can now sell their equity stake in a project after executing it and no longer have to keep collecting tolls and allow sub contractors to take over
A conflict-of-interest clause said that there should be no more than 5% of cross-holding between rival bidders has been increased to 25%
In order to attract smaller companies, the restriction has been put in place by which a company which doesn’t achieve financial closure in 3 projects involving more than Rs. 3000 Crore each, it can’t bid for more.
Land Acquisition process is expedited by involving different states and almost all states have agreed to it.

(views of Mumbai Pune expressway and Ahmedabad Vadodara expressway part of Golden Quadrilateral)


AS OF April 30, 2010 ( Highways that connect more than 100 important and major cities including METRO's which are 4/6 laned:

% completed
Achieved (km)
Target (km)
Golden Quadrilateral
North South East West Corridor

20 km/day
12 km/day

Conclusion: We have scope for almost 40-50000 km that are under various stages of bidding and implementation. Some are yet to be awarded. However, the most important achievement is that almost all major city highways are covered with 4-6 lanes.

Saturday, May 15, 2010

An update on Indian National Highways - Part 1

In this Part - 1 of the two part series, I post the pictures of the newly constructed highways from North, South, East, West and the Center of India and at the end bring about the best parts and what's lacking in the newly constructed highways. Part - II will deal with some interesting statistics, scope for further growth and other challenges in the road growth and why India cannot aggressively go like China.

Remember, it is very easy to say what is special about having 4 lanes, why not 8 lanes considering the population? Answer:
  1. We must realize we have very high population and the unused land is very low. Population density is very high.
  2. We have begun to build roads pretty late (usually you plan cities after you build roads, but in India it has been otherwise). 
  3. Even if we did have land, no one is going to drive from Kashmir to Kanyakumari (even if there was an access controlled expressway with very high speed limits), simply because it consumes enough fuel which no one would shell out unless there is a need. 
  4. A majority of long distance travel will always continue to be done via trains. 
  5. Hence, 6-8 lanes must be done only between pair of cities where the road movement is very high i.e. say Delhi-Gurgaon (which currently has), Delhi-Noida (currently there), Delhi-Agra (under construction 6 lane - to be opened in 2011), Ahmedabad-Mumbai (6 lane under construction), Delhi-Jaipur(under construction), Chennai-Bangalore, Bangalore-Mysore, Mumbai-Pune (already there), Hyderabad-Vijayawada, Bangalore-Hyderabad and many such places.

PIC COURTESY: Google, Skyscrapercity, team-bhp and indian highways group.

1) Entrance to LEH:

2) Panipat elevated highway

3) Some road stretches - Agra-Mathura, Agra-Jaipur

4) Ambala Chandigarh highway and some roads in Rajasthan, Haryana and Allahabad (UP)


1) Roads in GUJARAT..(Ahmedabad-Vadodara, Samkhiali, Kutch, Bharuch). The last 2 are aerial views of interchanges on Ahmedabad-Vadodara highway.

 2) Roads in Maharashtra:
The first 2 pics are of Kasara Ghat.

(Pune Kolhapur below)

(towards SEONI in MP below)
(Sion Panvel Highway above)


1) Pics in Karnataka: (Nh4 Tumkur and Mysore-Mangalore highway stretch and the last are North Karnataka Belgaum and Bellary side, Hubli Dharwad road)

2) Andhra Pradesh (Andhra-Karnataka border, outside Hyderabad, Vizag roads and the last one is Bhavani Chengampalli bypass road):

3) TamilNadu: (Salem, Krishnagiri, Dharmapuri, Dindigul, Nagercoil roads)

(Roads in Asanol-Dhanbad connecting Bihar to Jharkhand, then you can see West Bengal, Bihar's NH-2 and the last 3 show the roads in NE that are under construction)


Madhya Pradesh roads: (Jabalpur, Seoni).

Positive Impact of the ongoing Highway expansion
·         Public-private partnership is the best way to go rather than depending on Govt to do everything.
·         Vehicle production has increased and multinational companies are investing in R&D to develop high mileage cars. In fact, the auto sector saw a 40% growth when there was recession in the West.
·         People have begun to drive long distances by road.
·         Speed limits can be maintained as high as 100 km/hr on several stretches if not all.( Most roads in China have 110 km/hr while expressways in China have speed limits of 120 km/hr). The postage signboard is 80 km/hr on several Indian highways newly constructed.
·         Signboards indicating distances on almost all major highways.
·         More companies are ready to invest in not only making roads, but also constructing malls, colleges, and factories around the highways.
·         Many jobs are being created and this is an excellent opportunity for civil engineers, contractors, companies and every stakeholder in the making of a highway.
·         Several stretches are being 6 laned.
·         Real estate is booming in all areas where these new highways are coming up.
·         Inventory levels and the frequency with which they can be filled up have increased for almost all firms in those cities which the new highways connect (because of availability of better roads by which freight travel has become easy).
·         Boom time for steel, cement, construction companies and especially demand for heavy commercial vehicles and road construction equipment manufacturers.

Flip Side of the ongoing highway expansion
·         Road fatalities haven’t decreased. First of all, when Drivers License can be obtained without actually driving we can realize what sort of drivers drive.
·         Greenery not maintained on all highway roads.
·         Shoulder lanes are not available everywhere.
·         Although most stretches are being done on BOT basis for 30 years...what happens after 30 years?  Who’s going to maintain it?
·         The accountability of the contractors in maintaining roads so far has been fairly good as per reports from various journalists and newsgroups. However, some contractors do not maintain the road despite people paying heavy toll. Unless Govt has an automated mechanism of monitoring the entire highway project, it is very difficult to expect perfect accountability.
·         Lane spacing on some roads is not uniform.
·         No proper presence of hotels, petrol bunks everywhere. The Government is trying to mandate the same, but sometimes land not available everywhere.
·         Adequate stretches where people can cross are not uniformly made on all highways.
·         We need almost 20 years before we see any proper lane discipline on highways, forget city's roads. The only silver lining is that the barriers in the middle of the roads ensure you don’t bump onto the opposite traffic and vice versa.
·         By passes and exits are not well executed by all contractors.
·         No road side emergency services. This is crucial and is absent.
·         It is very important that the Government takes critical inputs from various other countries outside India to ensure we have the best roads.