At a time of tepid private sector investment in the highway sector, the interest shown by 11 players in the 594-km Ganga Expressway project that would connect Meerut and Prayagraj has boosted the outlook for such mega road projects. Apart from nine Indian businesses, two foreign building businesses – IJM Corporation Berhad (from Malaysia) and Intopia Construction Pvt Ltd (from South Korea) —have submitted expressions of interest (EoIs) for the Rs 36,000-crore greenfield project, easing financing issues for the Uttar Pradesh government which will have to deploy more sources on social welfare owing to the coronavirus crisis.
Among the Indian businesses to have evinced interest in creating the expressway on a style, bid, finance, operate, preserve and transfer basis are Adani Road Transport, Ashoka Buildcon, Welspun Enterprises and Ircon International. It is the monetary effect of the pandemic that produced the state government opt for the public private partnership (PPP) route for the Ganga Expressway project, which would run across 12 districts and 529 villages of the state. The Agra-Lucknow Expressway was funded by the state and so is the case with the Purvanchal Expressway which is beneath building.
Awanish Awasthi, CEO of the Uttar Pradesh Expressways Industrial Development Authority (UPEIDA), says the government has kept its choices open on the funding model to be employed, like the BOT/Annuity route. “We have engaged SBI Capital as our financial advisor and are conducting a preliminary market survey on the model best suited for this project. Since we have six months’ time in which we will be acquiring land for the project, we have ample time to finalise these issues. The good part is that we are borrowing from nationalised banks, with almost Rs 25,000 crore of loan already having been sanctioned at an interest rate of 7.05%, which is the lowest in the country for such a project,” he says.
Rajeshwar Burla, vice-president, corporate ratings at ICRA, thinks the route the state government opts for would ascertain the scale of the private sector’s involvement in the project. “The PPP model is usually considered the right route for infrastructure creation. But in the last few years, private sector interest in such projects, especially under toll-based models, has ebbed. For the Rs 36,000 crore project, the equity requirement from the private sector would be around Rs 10,000 crore in the case of a toll-based model, while the broad requirement from the private sector would be Rs 5,000-5,500 crore under the hybrid annuity route. The government is likely to face challenges in attracting private participation if it decides on a toll-based model, as the overall appetite of the private sector for such projects remains quite subdued because of high equity commitments and market risks,” he cautions.
As for land acquisition, Awasthi says work on acquiring the 7,800 hectares expected for the project will commence in January itself. “We plan to have 90% of the land required in place by June 2021. Civil construction will start in the second half of 2021, for which we had invited expressions of interest (EoIs). We plan to execute the project in about 30 months’ time, by the end of 2023,” he says.
Of the Rs 36,410 crore to be spent on the project, land acquisition would account for Rs 9,255 crore and building charges for about Rs 22,145 crore. The six-lane expressway would not only lessen travel time involving Meerut and Prayagraj but also act as a catalyst for the improvement of the area. “It will change the entire landscape of the eastern part of UP once it becomes operational,” says ICRA’s Burla.