Reliance, L & T Bid For Rs 345cr Nh-8 Four Laning Project

Reliance Industries Ltd (RIL), Larsen and Toubro (L&T) and Reynong of Malaysia have pitched for the Jaipur-Kishangarh four laning project on National Highway no 8 (NH-8) in Rajasthan.

The cost of this project has been estimated at Rs 345 crore and has annual traffic flow of 22,000 passenger car units (PCUs) sources here say. Of this about 60 per cent is in the form of heavy commercial vehicles and about 20 per cent in the form of buses. The remaining 20 per cent is accounted for by passenger cars.

This is the second four laning project in which both RIL and L&T are bidders. The other project for which both RIL and L&T have bid is the Chingelput-Tindivanam sector on NH-45 in Tamil Nadu. The cost for four laning of this sector is estimated at Rs 357 crore and the traffic flow is about 50,000 PCUs, almost 80 per cent of it in the form of heavy vehicles.

 

Sources say that corporate preference has been heavily weighted in favor of the four laning projects and bypasses, in view of the comparatively low operational risks involved. Accordingly barring the foreign participant neither of the Indian bidders are expected to seek any kind of traffic gurantees on this segment.

The National Highways Authority of India provides gurantees to the extent of five per cent of the traffic flows and a subsidy on the project cost to the extent of 40 per cent of the capital cost of the project and participation of NHAI in the equity of the special purpose vehicle (SPV) up to 30 per cent. But current indications are that neither of these bidders have sought any subsidy for executing the project nor will they seeking any NHAI participation in the equity since this would mean that there would have to be a revenue-sharing arrangement. In the NH-47 bypass project, L&T had not opted for government support.

The reason attributed for this is on account of the high revenue flow in these segments, allowing for a high return on equity. L&T anticipates a return on equity upwards of 25 per cent on the projects it has bid. In the four laning projects, if the current traffic flow is of any indication the project internal rate of return is expected to be well over the minimum of 16 per cent offered by the ministry of surface transport.