L&T Vadodara-Bharuch Tollway Limited

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In July 2006, National Highways Authority of India (NHAI) awarded a 15 year concession contract to India’s Larsen and Toubro Limited (L&T) to widen and strengthen the 83 Km stretch on National Highway 8 (NH-8), between Vadodara and Bharuch, in Gujarat State. Under the contract, L&T was responsible for the operation, maintenance and widening of the existing four-lane road to a six lane divided highway. In addition, the project included 10 major and 36 minor bridges, 11 flyovers, two road over bridges, 11km of service roads, and pedestrian and cattle crossings at specified locations. The 15 year concession term included the construction period of 30 months. The Vadodara-Bharuch road project, awarded under National Highway Development Project – Phase V, forms an important link in the high density corridor connecting Mumbai and Delhi. The road expansion was expected to ease traffic congestion and give significant stimulus to trade and commerce in the entire region. L&T established a special purpose vehicle, L&T Vadodara-Bharuch Tollway Limited, to implement the project. L&T won the international competitive tender, conducted by NHAI, by offering to make an upfront payment of US$ 104 million for the right to collect tolls during the term of the concession. According to the tender documents, NHAI would pay up to 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$ 145.6 million. The project reached financial closure in December 2006. State Bank of India was the lead arranger of the bank debt, which had a 13.5 year tenor and featured cash sweeps with accelerated payments. Construction work on the project began in Jan 2007 and was expected to be completed by July 2009. As per NHAI, the project was completed in September 2009.