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Title: India Gomati Chauraha-Udaipur Project Toll Road

Language: English

Type: Document

Nature: Agreement

Published: March 7, 2021

Region: East Asia and Pacific (EAP)

Country: India

Sector: Transportation

Keywords: PPPs by Sector *, PPPs for Transport **, India, Model agreement, Road

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Document(s):

Document Summary:

Gomati Chauraha-Udaipur Project Toll Road – Concession Agreement between the NHAI and Shreenathji-Udaipur Tollway Private Limited (“Concessionaire”), a subsidiary of Sadbhav Infrastructure Projects Limited, to widen the Gomati Chauraha–Udaipur section of National Highway No. 8 (“NH-8”) in the State of Rajasthan. The agreement is for a term of 27 years (including the design and construction phase) and is structured on a DBFOT basis. The agreement is based on the model concession agreement published by the NHAI, but contains a number of bespoke provisions. The concession agreement adopts a tolling model, which shifts demand / revenue risk to the private sector. The government undertakes not to develop competing road projects, so as to further protect this project’s profitability. The concession agreement also contains an interesting profit-sharing mechanism which allows the government to receive some upside in the event of significant profits.

Document Details:

Key features of the Gomati Chauraha-Udaipur Project Toll Road Concession Agreement:

  1. Land acquisitions and approvals – the NHAI assumes primary responsibility for procuring the land required to carry out the project and grants the Concessionaire a license to use the land (Art 3.1.2 and 10.1). The Concessionaire has primary responsibility for procuring most of the regulatory permits required for the project. NHAI’s responsibility is limited to providing the Concessionaire with reasonable support and assistance in procuring such permits and procuring certain permits related to environmental protection (Art 5.1.4 and 6.1.2).

  2. Local taxes and levies – the NHAI must make best endeavors to procure that no local tax, toll or charge is levied or imposed on the use of whole or any part of the Project (Art 6.1.2).

  3. Concession Fee – the Concessionaire is required to pay the NHAI a fixed annual concession fee, escalated by 5% year on year (Art 26).

  4. Tolling arrangements – the Concessionaire has the sole and exclusive right to collect road tolls during the operational phase. It may retain the toll collected for its own benefit up to an agreed annual Traffic Cap, set at 120% of the toll road’s designed capacity. Road toll collected above the Traffic Cap must be remitted to the NHAI (Art 27). The agreement contemplates for an adjustment of the Concession Period where actual average traffic volume falls short (entitling the Concessionaire to an extension of the Concession Period) of or exceeds (entitling the NHAI to a contraction of the Concession Period) the target traffic volume.

  5. Revenue Shortfall Loans – if toll revenue in a year is insufficient to cover operational expenses, the Concessionaire can request the NHAI to provide a Revenue Shortfall Loan (at an agreed interest rate) to cover the shortfall (Art 28).

  6. Competition – the NHAI is required to provide compensation to the Concessionaire (reference to lost revenue) if certain competing road infrastructure is opened to traffic (Art 35.4)

  7. Step-in rights – the NHAI has the right to step-in to carry out the project and operate the road infrastructure in the event of:

    1. a failure by the Concessionaire to maintain or repair the rail system in accordance with the agreed maintenance requirements;

    2. a material breach of the concession agreement by the Concessionaire which is likely to cause material hardship or danger to road users;

    3. a national emergency or civil commotion; or

    4. a suspension of the concession agreement for Concessionaire default.

  8. Termination rights – the agreement may be terminated by either party for a Force Majeure Event subsisting for 180 days (Art 34.9). Each party also has the right to terminate for counterparty default. Upon termination, the State must pay a termination payment to the Concessionaire (calculated with reference to the Concessionaire outstanding debt and equity investments). The amount payable varies depending on the basis for termination (Art 37).

  9. Property taxes – All property taxes on the Site are payable by the NHAI (Art 43.3).

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