Lucknow Sitapur Expressway Project

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In June 2006, National Highways Authority of India (NHAI) awarded a 20 year concession to Lucknow Sitapur Expressways Limited (LSEL) to upgrade, finance, operate and maintain the 75 km stretch on National Highway twenty four (NH-24) between Lucknow and Sitapur, in Uttar Pradesh State. The Lucknow Sitapur expressway project primarily involved strengthening and widening of the existing two lane road to four lane dual carriageway. The concession term included the construction period of 36 months. This road upgrade project was expected to enhance the accessibility of western UP to the rest of the country and give significant stimulus to trade and commerce in the entire region. LSEL, a special purpose company established to implement this project, was promoted by India’s DS Constructions Limited and its partners. However, information on the other partners and the exact shareholding structure of LSEL was not available. The DS consortium won the project in an international competitive tender, conducted by NHAI, by bidding for the lowest grant. Note that information on the grant amount was not available. 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 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$ 99.3 million. The project reached financial closure in December 2006. The debt was raised by a consortium of banks led by State Bank of Travancore. LSEL was to be compensated for the capital and operating costs from the tolls collected during the concession term. Construction work on the project began in June 2006 and was expected to be completed by June 2009. None None