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The price of road development

C. Shivkumar

WITH the Railways to double the tracks between Bangalore and Mysore, traffic pressure is expected to ease on the parallel State Highway (SH) 17 connecting the two cities. But, then, given the route's current traffic pattern, one wonders wheth er it would not throw up an excess transport capacity, at least initially.

At present, the traffic on the route is heavily loaded in favour of road transportation. SH 17 is a high-density corridor, for both passenger and freight movement. The railway capacity between the two cities remains largely underutilised, because of the limited volume of bulk cargoes, both dry and liquid, which are the main components of the railways freight.

Neither Mysore nor Bangalore can claim to have major consumers of thermal coal, steel or POL products. Items that generally move between the two cities, therefore, include low-freight cement, foodgrains and vegetables. Transport economics suggests it is preferable to move these items from road to rail. The passenger preference is tilted towards road transportation.

However, the viability of a project is seldom determined on the basis of current usage patterns. Public utilities often tote the axiom `capacity creation is for meeting future demand.' On the basis of this assumption, the State government has chosen to p articipate in the railway's track-doubling project through the Karnataka State Railway Development Corporation, a newly-formed special-purpose vehicle.

Currently, the connectivity between the two cities is provided by a single broad gauge line and a double-lane road corridor (about nine metres wide, inclusive of shoulders). This highway already supports a traffic volume equivalent to 60,000 passenger ca r units, justifying its conversion into a six-lane road.

But six-laning presupposes acquisition of land along the route. Assuming that there has to be at least a central median a metre wide, the land to be acquired would have to be at least eight metres on either side along the 110-km stretch.

Acquiring land all along the route is near impossible due to ribbon development. Also, the area is dominated by sugarcane farmers, who wield considerable political clout in the State. Neither would the cost of acquisition be small.

The only option available, therefore, is to widen the road to a four-lane corridor and use grade separation techniques involving the creation of access control facilities and a central median. In grade separation, the land acquisition cost is low, but th ere will be heavy expenditure on the construction of underpasses needed to avoid intersections and viaducts.

It is estimated that widening the highway to four lanes will cost approximately Rs. 4.5 crores (base cost) per kilometre. The total cost will thus come to around Rs. 500 crores. With grade separation, the cost is likely to be about Rs. 600 crores. This i s exclusive of the land acquisition cost.The effective cost of four-laning would, thus, come to about Rs. 2,000 crores. This will place too much pressure on the State's consolidated fund and the exchequer.

Instead, focus has now shifted to the construction of a four-lane expressway between the two cities to provide high-speed connectivity at an approximate cost of Rs. 1,200 crores. The expressway's promoters -- Nandi Infrastructure Corridor Enterpris es Limited (NICE), a joint venture of the Kalyani Group, SAB International Limited, and VHB -- have been quietly working on the expressway concept for the last three years. The preliminary work, including freezing of engineering design, identification of the corridor route, and possible relocation of villages, has begun.

The expressway project will be taken up on a build-own-operate-and-transfer basis, thus providing for leasehold rights along the project fixtures, including land, during the 30-year concession period. However, it is just on the eve of the expressway proj ect's financial closure that the Railways has begun working on doubling the line. The doubling cost is put at Rs. 200 crores, including the cost of the signalling systems on the existing alignment.

However, this figure changes if the route speed is to be raised to about 100 km, so as to allow for faster movement. The Railways has to construct approximately 40 bridges, viaducts and use curve reduction techniques.

The key question, therefore, is: Will the traffic volume ensure the expressway's viability? This is important because the promoters have targeted a minimum internal rate of return (IRR) of 18 per cent during the concession period.

``But all these have already been factored into the project at the time of carrying out due diligence,'' said Mr. Ashok Kheny, NICE's Managing Director. He added: ``We have also taken into account the probable four-laning of the existing State Highway. W e expect on the expressway the kind of traffic one sees in long-distance freight carriers, entailing substantial savings of as high as 20 per cent, in the form of vehicle operating costs.''

Nevertheless, the base traffic estimate in the first year of operation has been fixed at 15,000 passenger car units, which is low for an expressway. As a result, the entire return on equity is expected to be back-loaded, implying that major traffic flow is expected five years after commissioning. This is because some relocation of industrial townships is expected to take place so as to take the pressure off Bangalore city's urban infrastructure.

This, in turn, will stimulate the emergence of alternative zones of economic/industrial development, beginning with Mysore city and its neighbourhood. This is the equity risk investors will have to assume.