Ircon – Soma Tollway Private Limited

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In September 2005, National Highways Authority of India (NHAI) signed a 20 year concession agreement with Ircon – Soma Tollway Private Limited (ISTPL) for the upgrade, operation and maintenance of the 118 km stretch on National Highway 3 (NH-3), between Dhule and Pimpalgaon, in the state of Maharashtra. Under the agreement, ISTPL was required to design, finance and widen the existing two-lane stretch to a four lane highway with paved shoulders. In addition, ISTPL was also responsible for the construction of 14 km of service roads on both sides of the highway, two toll plazas, two truck laybys and one rest area. The concession term included the construction period of 36 months. The Dhule-Pimpalgaon road upgrade project, part of the National Highway Development Project – Phase III A, was in response to an urgent need to strengthen and upgrade the region’s roads due to a considerable increase in traffic and commercial activities. ISTPL was a joint venture with equal ownership between India’s Ircon International Limited and Soma Enterprise Limited. The Soma-Ircon consortium won the concession in an international competitive tender, conducted by NHAI, by offering to make an upfront payment of US$ 13 million for the right to collect tolls during the term of the concession. India’s highway development policy allowed ‘viability funding’ by NHAI to the tune of 40 percent of the capital costs as grant to the concessionaire, subject to competitive bidding. However, in high traffic density corridors like this one that are very profitable, the bidders usually offered an upfront payment to NHAI instead of seeking a grant. The total capital cost of the project was estimated at US$ 133.7 million, including the upfront payment to NHAI. The project reached financial closure in November 2006. The debt was arranged by a consortium led by State Bank of India and included State Bank of Hyderabad, State Bank of Patiala, State Bank of Bikaner & Jaipur, Allahabad Bank, UCO Bank, United Bank of India and Bank of Maharashtra. Construction work on the project began in March 2006 and was expected to be completed by March 2009. As per NHAI, the project was completed on March 2010 and is currently operational.