abhinav prakash

7/30/2019 Abhinav Prakash

1/10

FAST TRACK CONSTRUCTION:

Firstly BOLT was tried in 1997.

Later on it decided to go for BOT scheme in 2000-

01.

Work started in 2002: approx. 2 years.

Completed on 2004.

Good achievement but the time taken was too

much.

BOT schemes are good for a new project.


2/10

QUALITY OF CONSTRUCTION:

Lower construction costs, reduced life cycle

maintenance costs & lower costs of associated risks:

PPPs.

Long term operation & maintenance responsibilities

to the private sector: in traditional contracting.

Reduces the risk of future fluctuations in operation

costs.

In this case not much benefits could be drawn, only

final quality of project was better due to high cost.


3/10

NATURE OF FUNDING:

Estimated cost was Rs 70 crores in 2001.

Debt equity ratio: 2.75 & Rs 50 cr. from long term

bank & rest from promoters equity.

Various bids were invited & the lowest bid of Rs

7.96 cr. with IRR of 16.27% was awarded the

project.

Due to inflation risk & additional liability the cost

incurred upto Rs 92 cr. with IRR upto 12% only.

12% IRR considered good return to SPC & it is not a

very high cost for railways.


4/10

IMPLICATIONS:

OPERATIONAL Deputy Chief Engineer of engineering dept. was nodal

officer to interact the project.

Various disputes & conflicts took place such as:

Delay in finalysing yard plans & its signal interlockingpans.

Delay in traffic blocks for movement of material &alterations in yards.

Delay in materials like rails, sleepers, switches, etc from

RDSO.


5/10

CONTRACTUAL

It was specified that track would be made for 100

KMPH to the satisfaction of CRS & make up of

earthwork also.

The concessionaire was interested only in shortterm objectives.

The main objective was to address the specifying

the quantity of work & quality of materials to beused.

Through this the possibility of SPC going low quality

work can be avoided.


6/10

LEGAL

The legal dispute occurs because of differentinterpretations by concessionaire & the dept.

According to concessionaire, concession period

starts from appointed date i.e. date of finance close

& access charge become payable from the date of

COD.

Finally point of concessionaire has been accepted.


7/10

Risk Management

1. Demand Risk Railway operation has the monopoly of railways

This project is a broken link and having other alternative

2 Construction Risk-

Performance guarantee deposit Rs 5 crore

Completion period was linked with bonus and penalty clauses

3 Supply Risk-

Monopoly of railway

Inspection of RDSO (Railway Design Standards Organization) ismandatory before using material

Lack of supplier


8/10

Risk cont..

4 Human Resource Risk

Lack of availability of trained manpower.

5 Design Risk-

Negligence in the design work

Principal agent conflict-

Complex nature of work

6 Project Management Risk-

Detailed sequencing of project was done

Mile stones were made


9/10

Contd

7 Inflation Risk-

Major items had inflated between the date of RFP and to real

execution

For example- Rail, Ballast, Sleeper had inflated from 31000/MT to

35458/ MT

8 Maintenance Risk-

Requirement to maintain a level of standard for design and standard

work

Warranty of 12 month

9 Regulation Risk

Risk is shared between Railways and concessionaire as per clause


10/10

Contd

10 Risk of obtaining clearances from other agencies-

Railways has taken the responsibility of getting clearances from otheragencies to protect the concessionaire.

11 Future cash flow risk-

Risk of default in getting annuity from the Railways

12 Land acquisition Risk-

Land acquisition was the responsibility of Railways

13 Force majeure risk-

Risk of politician and non politician

abhinav prakash

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