Viramgam Mahesana Gauge Conversion Project

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Viramgam Mahesana Project Limited (VMPL) entered into a concession agreement with Ministry of Railways, Government of India (GoI) in May 2003, to implement the 65 km Viramgam Mahesana gauge conversion project in Gujarat, India. The project involved conversion of existing meter gauge railway track lines connecting Viramgam to Mahesana to broad gauge and the associated civil and track works. VMPL was also responsible for all the financing, and operation and maintenance of the rail line for 12 years, excluding construction period. The new broad gauge railway line was expected to improve the railway connectivity of Kandla Port in Gujarat with northern India. The project was also expected to reduce the distance between North/North-Western States and ports of Gujarat by 70 Km and ease traffic at the busy Ahemdabad section, resulting in big savings to Railways. The anticipated traffic on the project railway line was about 10 freight trains and 2 passenger trains each way per day initially, which was likely to grow further in future, as against just two trains prior to the project. VMPL, a wholly owned subsidiary of Delhi based DS Constructions Limited (DSCL), was established to implement this project. DSCL won the project in an international competitive tender, conducted by Indian Railways in December 2002, by quoting the lowest annuity amount of US$ 1.7 million. Under the concession, VMPL was compensated for the capital and operating costs including returns by way of a fixed semi annual payment (annuity) from the GoI during the operation period of 12 years. The total cost of the project was estimated at US$ 19.9 million. The project reached financial closure in August 2003 with a debt equity ratio of 70:30. UTI Bank was the sole financier of the US$ 14 million debt. Construction on the project began in May 2004 and the new broad gauge railway line operational in November 2004. Check with Karina if annuity can be considered a revenue guarantee??