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 companies, two foreign construction companies – 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 concerns for the Uttar Pradesh government which must deploy more resources on social welfare owing to the coronavirus crisis.
Among the Indian companies to have evinced interest in building the expressway on a design, bid, finance, operate, maintain and transfer basis are Adani Road Transport, Ashoka Buildcon, Welspun Enterprises and Ircon International. It is the financial impact of the pandemic that made 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 under construction.
Awanish Awasthi, CEO of the Uttar Pradesh Expressways Industrial Development Authority (UPEIDA), says the government has kept its options open on the funding model to be employed, including 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 determine 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 required for the project will begin 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 construction costs for around Rs 22,145 crore. The six-lane expressway would not only reduce travel time between Meerut and Prayagraj but also act as a catalyst for the development of the region. “It will change the entire landscape of the eastern part of UP once it becomes operational,” says ICRA’s Burla.