Infrastructure - Roads

India’s road networking covers 2.9 million kilometers, the third largest in the world, with only 34,298 km of National Highways suitable for speedy transportation. Though it constitutes less than 2% of the total road network, it carries more than 40% of the traffic. According to Government estimates, by the year 2000 road traffic will account for 87% and 65 % of passenger and goods traffic, respectively, compared with 80% and 60 % at present. About 20% of the NH need widening from single to double lanes, and about 70% of two lane roads have to be strengthened. Selected corridors on NH need conversion into Expressway.

The Government is looking for both private investment and foreign to build national highways and their maintenance. The National Highway Authority of India (NHAI) received a budgetary allocation of $ 56 million in the Indian financial year 1997-98. Private parties investing funds in identified projects will be permitted to recover their investment by way of collection of tolls for specified periods. At the end of the agreed period, the facilities will revert to the Government.

Provisions relating to foreign investment in the road sector have also been considerably liberalized and include:

• Automatic approval for foreign equity participation up to 74% in the construction of roads and bridges.
• Automatic approval for foreign equity participation up to 51% in land transport support services such as operation of highway bridges, toll roads and vehicles.
• Land required for construction and operation of facilities will be made available by the Government free from encumbrances.
• Five-year tax holiday with subsequent deductions of 30% for the next five years.

Duty-free imports of road-building machinery are now permitted in order to attract more private investment. Banks and FIs have cleared a draft model concession agreement for road projects, which incorporates project-specific traffic guarantees. It also envisages safeguards for both investors and the National Highway Authority of India (NHAI). The government has decided to offer sovereign guarantees on all new multilateral loans in the road sector which are routed through NHAI, which will aid NHAI in securing additional funding.