Government plans 40-year toll period for Mumbai-Nagpur Expressway project

Government plans 40-year toll period for Mumbai-Nagpur Expressway project

Finance department raises alarm, project cost up by Rs 3,795 crore before it starts

 Mumbai-Nagpur Expressway project
Even before the project is tendered out, the estimated cost of the project has shot up from Rs 45,452 crore to Rs 49,247 crore. (Express File Photo)

IN A controversial move, the Maharashtra government plans to allow private partners investing in the construction of the 701-km Mumbai-Nagpur Samruddhi Corridor the right to commercially exploit the road for 40 years.

The project, which also involves the development of 25 new towns, is seen as Chief Minister Devendra Fadnavis’s pet infrastructure project. It is to run through 10 districts, 26 talukas and 390 villages. On Tuesday, the state PWD tabled the draft of the concession agreement for the construction of the project before the state Cabinet. The agreement grants the concessionaire the right to collect user fees by levying toll for 40 years.

The state finance department has already raised a red flag over the period of concession. On the basis of the estimates of vehicular traffic that would use the corridor and the land development component, it has contended that the concessionaire would be in a position to recover the costs and earn reasonable profit within 10 years of operation. The concession of period should be restricted to 15 years at most, it had maintained. The state’s fiscal managers have also cautioned that in the past, the government has courted criticism for entering into concession arrangements that were seen as unduly favouring the private party.

Even before the project is tendered out, the estimated cost of the project has shot up from Rs 45,452 crore to Rs 49,247 crore. With the government setting an ambitious two-and-a-half year target for the completion of the construction work, the state-run Maharashtra State Road Development Corporation Limited (MSRDC) — the project’s nodal agency — has proposed to raise Rs 35,000 crore in loan from banking institutions and global lending firms. While the capital cost in the project was previously expected to be around Rs 11,000 crore, this is now expected to go up.


Following the finance department’s objection, the Cabinet, which sanctioned all the other terms and conditions of the draft agreement on Tuesday, has conditioned that the department’s approval would be necessary before finalisation of the revised project cost and the concession period.
Further, while the government has taken a policy decision earlier this year to fund big ticket infrastructure projects through off-budget borrowings due to the delicate fiscal health of the state exchequer, the government on Tuesday agreed to a condition to provide ‘equity support’ in the event of cost overruns or cash shortfall during the period of operation. Sources said the finance and the law departments have objected to the condition, but the cabinet appeared to have ignored their objection.

Sources added that the project’s lead lender had made it clear that it was agreeable to fund the project only if the government guaranteed such a support. The government has also accepted if the tolling contract were to be annulled or closed down due to political reasons or court cases, the concessionaire would be entitled to recover the loss of revenue from the MSRDC or the government.

While the law department has also raised objections over a condition that binds the government to reimburse the concessionaire for increase in cost owing to change in the scope of the project, the cabinet has okayed the condition. Further, the law department has objected to the non-collection of performance security from the contractor, but officials at the MSRDC argued against it, contending that the concession agreement was being signed between the government, the MSRDC, and the MSRDC-led special purpose vehicle formed for the project.

Sources said that the cabinet nod will clear decks for the MSRDC to enter into agreements with lenders to raise loans. The agency has claimed to have secured loan commitment worth over Rs 19,000 crore so far.