CHAPTER – 1

OVERVIEW OF NHAI
 Consultancy Services for Project Management Phase-I including Preparation of Final Detailed Project
Detailed Project Report for Upgradation of Highway starting form Junction with Report
NH-40 at Kurnool connecting Nandikotkur, Atmakur and terminating at its
Junction with NH-765 at Dornala to Two / Four Lane with Paved Shoulder Kurnool to Atmakur
Configuration (Package No: NH/IAHE/30, Category-I) (Package-I)

CONTENTS

1. OVERVIEW OF NHAI’S ORGANISATION AND ACTIVITIES...........................................................................3

1.1 ESTABLISHMENT.............................................................................................................................3
1.2 ORGANIZATION..............................................................................................................................3
1.3 FUNCTIONS.....................................................................................................................................3
1.4 MANDATE.......................................................................................................................................4
1.5 FINANCING MECHANISMS..............................................................................................................5
a) Budgetary Allocation..................................................................................................................5
b) Loan Assistance from International Funding Agencies...............................................................5
c) Market Borrowing......................................................................................................................6
d) Private Sector Participation........................................................................................................6
1.6 COST RECOVERY MECHANISM.......................................................................................................6
1.6.1 Toll Revenue..........................................................................................................................6
1.6.2 Negative Grant......................................................................................................................6

LIST OF FIGURE

Figure 1: Organisation Chart of NHAI..........................................................................................................7

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 Consultancy Services for Project Management Phase-I including Preparation of Final Detailed Project
Detailed Project Report for Upgradation of Highway starting form Junction with Report
NH-40 at Kurnool connecting Nandikotkur, Atmakur and terminating at its
Junction with NH-765 at Dornala to Two / Four Lane with Paved Shoulder Kurnool to Atmakur
Configuration (Package No: NH/IAHE/30, Category-I) (Package-I)

1. OVERVIEW OF NHAI’S ORGANISATION AND ACTIVITIES,

PROJECT FINANCING AND COST RECOVERY MECHANISM

1.1 ESTABLISHMENT
The National Highways Authority of India was constituted as a statutory organization by an act of
Parliament - National Highways Authority of India, Act 1988 (Act 68 of 1988). It is responsible for
the development, maintenance and management of National Highways entrusted to it and for
matters connected therewith or incidental there to. The Authority was operational from February
1995 as an autonomous body with the appointment of full time Chairman and other members.

1.2 ORGANIZATION
A full time Chairman heads NHAI. As per NHAI act, there are five full time Members, namely
Member (Admin.), Member (Finance) and three Members (Technical). There is also four-part
time (ex officio) Members of the Authority. The Authority has its field offices in the form of Project
Implementation Units (PIUs), Regional offices (RO) and Corridor Management Units (CMU) spread
all over the country. These units are headed by Project Directors (PD) and Regional officers (RO)
who are responsible for implementation of various NHDP Projects and operation and
maintenance of the completed sections.
All procurement related to works, services, equipment and goods i.e. civil contractors, consultants
and suppliers are made by the head office predominantly and as well as by Regional Offices. PDs
are also responsible for all pre construction activities and liaison to the Departments concerned of
Union and State Government for successful implementation of the Projects.
The Government has approved a proposal of restructuring NHAI. The salient points of the
proposal are, inter alia; increase of full-time Members from 5 to 6 and part time Members from 4
to 6, creation of 26 posts at the level of CGM and to build a core of permanent employees of NHAI
over a period of time. This process has been taken up.
A detailed organization chart of NHAI is given in Figure 1.

1.3 FUNCTIONS
The function and activities of National Highways authority of India are stipulated in NHAI Act.
1988. The clear mandate given by the Act is to develop, maintain and manage the National
Highways and other highways vested in or entrusted to it by the Government of India. The main
activities of the NHAI as stipulated in the Act and Rules are:
 Survey, develop, maintain and manage highways vested in or entrusted to it;
 Construct offices or workshops and establish and maintain, hotels, motels, restaurant
and rest rooms along or near the highways vested in, or entrusted to it;

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 Consultancy Services for Project Management Phase-I including Preparation of Final Detailed Project
Detailed Project Report for Upgradation of Highway starting form Junction with Report
NH-40 at Kurnool connecting Nandikotkur, Atmakur and terminating at its
Junction with NH-765 at Dornala to Two / Four Lane with Paved Shoulder Kurnool to Atmakur
Configuration (Package No: NH/IAHE/30, Category-I) (Package-I)

 Construct residential buildings and townships for its employees;

 Regulate and control the plying of vehicles on the highways vested in or entrusted to it
for the proper management thereof;
 Develop and provide consultancy and construction services in India and abroad and
carry on research activities in relation to the development, maintenance and management
of highways or any facilities, thereat;
 Provide such facilities and amenities for the users of the highways vested in or
entrusted to it, as are, in the opinion of NHAI, necessary for the smooth flow of traffic on
such highways
 Form one or more companies under the Companies Act, 1956 (Act 1 of 1956) to further
the efficient discharge of the functions imposed, on it by this Act;
 Engage, or entrust any of its functions to any person, on such terms and conditions as
may be prescribed;
 Advise the Central Government on matters relating to highways;
 Assist, on such terms and conditions as may be mutually agreed upon, any State
Government in formulation and implementation of schemes for highway development;
 Collect fees on behalf of Central Government for services rendered;
 Take all such steps as may be necessary or convenient for or may be incidental to, the
exercise of any power or the discharge of any of its functions

1.4 MANDATE
National Highways Authority of India (NHAI) is mandated to implement National Highways
Development Project (NHDP) which is
 India 's Largest ever highways project
 World class roads with uninterrupted traffic flow
The National Highways have a total length of 71,772 km to serve as the arterial network of the
country. The development of National Highways is the responsibility of the Government of India.
The Government of India has launched major initiatives to upgrade and strengthen National
Highways through various phases of National Highways Development project (NHDP), which are
briefly as under:

NHDP Phase I
NHDP Phase I was approved by Cabinet Committee on Economic Affairs (CCEA) in December 2000
at an estimated cost of Rs. 30,000 crore comprises mostly of GQ (5,846 km) and NS-EW Corridor
(981km), port connectivity (356 km) and others (315 km).

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 Consultancy Services for Project Management Phase-I including Preparation of Final Detailed Project
Detailed Project Report for Upgradation of Highway starting form Junction with Report
NH-40 at Kurnool connecting Nandikotkur, Atmakur and terminating at its
Junction with NH-765 at Dornala to Two / Four Lane with Paved Shoulder Kurnool to Atmakur
Configuration (Package No: NH/IAHE/30, Category-I) (Package-I)

NHDP Phase II
NHDP Phase II was approved by CCEA in December 2003 at an estimated cost of Rs. 34,339 crores
(2002 prices) comprises mostly NS-EW Corridor (6,161 km) and other National Highways of 486
km length, the total length being 6,647 km. The total length of Phase II is 6,647 km.

NHDP Phase-III
Government approved on 5.3.2005 up gradation and 4 lanes of 4,035 km of National Highways on
BOT basis at an estimated cost of Rs. 22,207 crores (2004 prices). Government approved in April
2007 up gradation and 4 lanes at 8074 km at an estimated cost of Rs. 54,339 crores.

NHDP Phase V
CCEA has approved on 5.10.2006 six lanes of 6,500 km of existing 4 lane highways under NHDP Phase
V (on DBFO basis). Six lanes of 6,500 km include 5,700 km of GQ and other stretches.

NHDP Phase VI

CCEA has approved on November 2006 for 1000 km of expressways at an estimated cost of Rs. 16680
crores.

NHDP Phase VII

CCEA has approved on December 2007 for 700 km of Ring Roads, Bypasses and flyovers and selected
stretches at an estimated cost of Rs. 16680 crores.

1.5 FINANCING MECHANISMS

NHAI proposes to finance its projects by a host of financing mechanisms. Some of them are as
follows -

a) Budgetary Allocation

The Central Government has revamped the dedicated Central Road Fund by increasing the cess
on petrol and bringing the diesel under its ambit. The Central Road Fund Act was also enacted in
the year 2000 to give statutory power. The present rate of cess is Rs 2/- per litre on both petrol
and diesel. The fund is distributed for development of National Highways, state roads, rural roads
and for railway over bridges/under bridges and other safety features as per provision of the CRF
Act, 2000. The cess contribution stands between rupees 5000 to 6000 crores per annum towards
NHDP.

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 Consultancy Services for Project Management Phase-I including Preparation of Final Detailed Project
Detailed Project Report for Upgradation of Highway starting form Junction with Report
NH-40 at Kurnool connecting Nandikotkur, Atmakur and terminating at its
Junction with NH-765 at Dornala to Two / Four Lane with Paved Shoulder Kurnool to Atmakur
Configuration (Package No: NH/IAHE/30, Category-I) (Package-I)

b) Loan Assistance from International Funding Agencies

Loan assistance for implementation of specific projects was taken from multilateral development
agencies like Asian Development Bank, World Bank and Japanese Bank of International Co -
Operation.
c) Market Borrowing

NHAI proposes to tap the market by securities cess receipts.

d) Private Sector Participation

Major policy initiatives have been taken by the Government to attract foreign as well as domestic
private investments. To promote involvement of the private sector in construction and
maintenance of National Highways, Some Projects are offered on Build Operate and Transfer
(BOT) basis to private agencies. After the concession period, which can range up to 30 years, this
road is to be transferred back to NHAI by the Concessionaries.

NHAI funds are also leveraged by the setting up of Special Purpose Vehicles (SPVs). The SPVs will
be borrowing funds and repaying these through toll revenues in the future. This model will also
be tried in some other projects. Some more models may emerge in the near future for better
leveraging of funds available with NHAI such as Annuity, which is a variant of BOT model.

e) Govt. Policy Initiatives

Following incentives to attract private sectors for development of highways have been announced
by the Government.
 Government will carry out all preparatory work including land acquisition and utility shifting.
Right of way (ROW) to be made available to concessionaires free from all encumbrances;
 Government to provide capital grant up to 40% of project cost to enhance viability on a case
to case basis;
 100% tax exemption in any 10 consecutive years within a period of 20 years;
 Concession period allowed up to 30 years;
 Well defined transparent procurement procedure with Standard Bidding Document;
 Arbitration and Conciliation Act 1996 based on UNICITRAL provisions;
 Entrepreneur is allowed to collect and retain Users’ fees (tolls) ;
 Duty free import of specified modern high capacity equipment for highway construction.

1.6 COST RECOVERY MECHANISM

1.6.1 Toll Revenue
The National Highways Act empowers NHAI to charge users’ fees on the sections of National
Highways, bridges on it. NHAI is charging users’ fees on completed four/six lane sections of
National Highways. Part of this fund is being used for maintenance purpose. The surplus amount
of user’ fees are also a part of financing of NHDP and other projects.

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 Consultancy Services for Project Management Phase-I including Preparation of Final Detailed Project
Detailed Project Report for Upgradation of Highway starting form Junction with Report
NH-40 at Kurnool connecting Nandikotkur, Atmakur and terminating at its
Junction with NH-765 at Dornala to Two / Four Lane with Paved Shoulder Kurnool to Atmakur
Configuration (Package No: NH/IAHE/30, Category-I) (Package-I)

1.6.2 Negative Grant

NHAI has received negative grant in few projects where the intensity of toll able traffic is very
high. This amount is also a part of financing of these projects.

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 Consultancy Services for Project Management Phase-I including Preparation of Detailed Project Report for Upgradation of Final Detailed Project
Highway starting form junction with NH-40 at Kurnool connecting Nandikotkur, Atmakur and terminating at its junction with Report
NH-765 at Dornala to Two / Four Lane with Paved Shoulder Configuration (Package No: NH/IAHE/30, Category-I)
Kurnool to Atmakur
(Package-I)

Figure 1: Organisation Chart of NHAI

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