Government’s Role in Road Toll Collection: The Coimbatore Bypass

Experience
Deepak Kumar Arya
169278078
First road project to be implemented in South India on BOT basis. The bypass was expected
to ease the traffic congestion in Coimbatore city , Tamilnadu and Salem-Cochin national
Highway running b/w Tamilnadu and Kerala. Construction of a 28 km long two lane bypass
road. The 32.2 m new Athupalam bridge across the river Noyal. The Railway over Bridge at
Chettipalayam Tamilnadu and the maintenance of the old bridge at Athupalam. Contracted
to be completed in 29 months, but completed in 22months. was ₹110 crores, of which ₹42
crores was funded by LTTIL as equity and ₹68 crores by institutional financiers as debt. The
revenue model of the project was through tolling where the Athupalam Bridge would account
for 60% of the revenue which will be collected for a period of 20 years and the rest 40% from
the bypass which will be for 30 years. As per the agreement, LTTIL was given a concession to
levy toll for a period of 20 years on the Athupalam Bridge and 30 years on the Coimbatore
Bypass. The agreement clearly specified that while the traffic risk was with LTTIL, the risk due
to non-payment of tolls would be with the state government.
It is a clear example of a failed BOT public private partnership project where the project details
and inefficient project structuring as LTTIL recorded a cumulative loss of ₹12.6 crores within
4 years. There are implications of government not supporting the project.
1. There is no clarity between the government and the developer on the resolution of
problems.
2. If the project does get into unanticipated problems. This would be a major deterrent
for private players to invest in road development projects.
3. Government is not fulfilling its role by taking action towards ensuring toll compliance
or compensating for the losses.
4. The response from the government remains so poor, future public private road
projects would be in jeopardy.
5. The poor support and delayed decisions from state government cause L&T under
tremendous pressure as huge funds have been borrowed in financing the project from
financial institutions which may result in adverse impacts on BOT project in the state.

This case raises questions on the future of the PPP model where the private firm and
government work hand in hand in the development of countries infrastructure. This also
raises question on Toll based revenue model and government’s role in case of any issue
regarding the same. And, whether for the BOT projects, annuities rather than tolling
would be a preferred route as tolling is very demand sensitive which increases risk from
investors point of view.