Mumbai-Pune expressway concession agreement inked at Rs 90 billion

At Rs 90 bn, agreement is worth 10 times the earlier pact

The Maharashtra State Road Development Corporation (MSRDC) has signed a concession agreement for Mumbai-Pune Expressway at Rs 90 billion, almost 10 times of the Rs 9.18 billion worth agreement inked in 2004. The 15.5-year agreement for India’s first expressway will come into force from September next year after the contract of the current toll manager, IRB’s Mhaiskar Infrastructure, ends in August.

The agreement between MSRDC, the government agency for the expressway and other road projects in Maharashtra, and its newly created subsidiary Mumbai-Pune Expressway (MPEL) is for the tolling rights and operations and maintenance of two parallel roads from Mumbai to Pune -- a 111-km stretch on National Highway 4 and the 95-km new Mumbai-Pune Expressway, an ICRA Ratings note stated.

The development comes even as a decision is awaited at the Bombay High Court, which asked the Maharashtra government to decide by September 6 whether toll collection on the expressway should continue. Officials concerned at MSRDC could not be reached for an immediate comment.

According to the ICRA note released earlier this week, MPEL has proposed to raise a term loan of Rs 65 billion, which will be used to pay MSRDC upfront.

According to people in the know, MSRDC is likely to use these funds for development of other projects in the state including the Mumbai-Nagpur Expressway project.

“MPEL will pay the balance of Rs 25 billion along with interest accrued at 7 per cent per annum at the end of the concession period,” according to ICRA.

The report also noted, “Notwithstanding the track record of toll collections, the project remains exposed to risks inherent in BOT (build-operate-toll) road projects including risks arising from political acceptability of rate hikes over the concession period and development or improvement of alternate routes.”

According to the ICRA note, the new Mumbai-Pune stretch witnessed healthy growth in traffic at a compounded annual growth rate of 8.86 per cent during FY08-18, primarily driven by growth in passenger vehicle traffic.