Toll rates for the 22-km Delhi-Noida Direct (DND) flyway were increased from 1st April by the Noida Toll Bridge Company Limited (NTBCL). Two wheelers toll rates have been increased from Rs 11 to Rs 12, for cars from Rs 22 to Rs 25, LCVs from Rs 45 to Rs 55, bus and truck will now shell out Rs 70 from earlier Rs 55. Large vehicles will pay Rs 100 from existing Rs 75 and extra-large vehicles from Rs 95 to Rs 135. This is not the first time toll rates have been increased. DND flyover is a classic case of how Public Private Partnerships (PPP) can be used by the corporate-bureaucratic-politician nexus to loot the nation.

The Delhi Noida Toll Bridge popularly known as the DND flyover is the result of a PPP (Public Private Partnership). This bridge marks the shortest route between Noida and Delhi. It is 9.2 km long with 8 lanes (4 lane dual carriageways) and 31 lane Toll plaza at the Noida end and 11 lane Toll plaza at the Mayur Vihar end. It is one of the three bridges across the Yamuna River connecting Noida with Delhi and is the only one which is tolled.

IL&FS, NOIDA and the Delhi Administration (DA) reached an in-principle agreement for the construction of DND Flyway on Build, Own, and Operate & Transfer (BOOT) basis. A tripartite Memorandum of Understanding (MoU) was signed between IL&FS, NOIDA, and Delhi Administration on April 7, 1992 for establishing the new bridge and defining the scope and mutual obligation of the various partners. As a consequence of this agreement, IL&FS received a mandate from NOIDA/Delhi Administration.

According to the MoU, a Steering Committee consisting of representatives of Government of Uttar Pradesh (GoUP), Delhi Government (DG), the Ministry of Urban Affairs and Employment, Government of India, Delhi Development Authority (DDA), NOIDA and IL&FS was established for monitoring the Delhi Noida Toll Bridge and taking decisions relating to the development of the DND Flyway. Pursuant to the decision of the Steering Committee, NTBCL was incorporated on April 8, 1996 under the Companies Act, 1956 for the purposes of developing, establishing, designing, constructing, operating and maintaining the DND Flyway.

On November 12, 1997 a Concession Agreement was entered into by NOIDA, NTBCL and IL&FS conferring to NTBCL, the right of implementation of the Delhi Noida Toll Bridge. The major components of the Delhi Noida Toll Bridge comprise of 552.5 Meters long, eight lane, short span box, continuous girder based bridge across the Yamuna river, approach ways to the bridge with cloverleaf interchange points at both ends to inter face with the existing road network, three minor bridges over existing watercourses, 28 lane toll collection plaza at the Noida end and a flyover with interchanges at the Ashram crossing in South Delhi.(built as per the support agreement with Delhi Govt. to augment traffic to DND flyover)

Construction of the Delhi Noida Toll Bridge was completed after 25 months, 4 months ahead of schedule. The Delhi Noida Toll Bridge was opened to traffic on 7 February 2001.The Ashram Flyover was opened to traffic on 30 October 2001.

The PPP provides that concession would last until NTBCL recovered the total project cost plus a return of 20% per annum of the total project cost and tolls would be fixed accordingly. Moreover, in case of toll revenue short fall concessionaire will be granted development rights by government to augment its revenues or concession period will be increased as per the requirement. Therefore, it warrants a clearly and rationally defined Total Project Cost (TPC). The Total Project Cost is defined in the Concession Agreement to mean the aggregate cost of the project, any major maintenance expenses plus any shortfall in the Return in any specific year. It also includes the other costs of commissioning. Other Costs of Commissioning means “all costs and expenses of whatever kind, as specified in the accounts maintained by the Concessionaire, NOIDA, Sponsor, Govt. of UP, and Delhi Government in the format approved by the Independent Auditor and are duly audited by the Independent Auditor, incurred in respect of the Project, prior to the Project Commissioning Date, other than the Cost of Construction, including but without being limited to: (a) cost incurred in relation to the acquisition and preparation of the land upon which the facilities shall be located (including all lease rentals payable) (b) all pre-operative expenses incurred by NOIDA, the Sponsor and the Concessionaire prior to entering into the Agreement, (c) management overheads such as corporate office expenses, salaries to staff, traveling expenses, administrative overheads, and management and legal expenses, (d) all consulting and advisory service fees incurred prior to the Project Commissioning Date, including all site investigation charges, Independent Engineer and other engineers’ and architects’ fees incurred in relation to the implementation of the Project, (e) expenses incurred by the Concessionaire for mobilization of financial resources, in whatever form for funding the Project, including but not limited to, brokerage, commissions, upfront discounts on debt, merchant banker’s fees, legal fees, publicity and travel expense, financial advisory charges and other related charges and fees including charges and fees payable under the Financing Agreements, (f) any duties (including stamp duty payable on the Financing Agreements), taxes, levies, fees and commissions, duly grossed up, (g) other specific expenses as agreed upon and incurred by the Concessionaire, Sponsor, NOIDA, GOUP and DG under the Support Agreement or their respective agencies during implementation of the Project, (h) all costs of the insurance required to be obtained in connection with the Project prior to the Project Commissioning Date, and (I) the Management Fee (the Management Fee is 1% of the Project Cost, payable to the Sponsor (IL&FS) upon financial close).

We see that definition of TPC is open-ended despite including practically everything in it. Moreover, TPC is calculated ex-post which means that concessionaire was given an open hand in construction of bridge. It created an incentive for cost-maximization rather than cost-minimization and efficiency. It was like handing over a blank cheque at the cost of the public which will have to pay for whimsical number filled in by concessionaire. Noida authority had guaranteed a rate of return on unknown amount.

It also include “without limitation” attorneys’ fees associated with the settlement of pending or threatened suits/claims (other than suits/claims resulting from the negligence or breach of the concession agreement by the concessionaire). Allowable O&M expenses also include such items as “fines” on the concessionaire. While company will incur the expenditure of any major repair work that too will be added to the Total Project Cost. So if a section of road breaks down due to low quality of construction material used, its repair cost will be included in the Total Project Cost and if authorities decide to impose fines on company that too can be included in the Total Project Cost. If authorities impose a fine on concessionaire for that low quality work then it will too be added to the TPC. And if authorities wake up to this travesty and try to take legal action against concessionaire for the same, it will too be part of the TPC!

Since any deficit in returns significantly increases the total cost of the project, this can create a vicious cycle in which the shortfall in achievement of required returns and the compounding thereof results in a repeated need to lengthen the concession period and/or raise toll rates or grant Development Rights. It will have rights to undertake additional projects to either increase the traffic flow or supplement the revenue via additional projects altogether. And such a situation has already come to pass. We have seen that company suffered heavy losses in the initial years of its operation. Therefore, it undertook the construction of Mayur Vihar link to divert the traffic of densely populated East-Delhi towards the toll bridge. Plus, it had already undertaken the construction of Ashram flyover under the support agreement with Delhi to ensure smooth dispersal of traffic and increase traffic from the Delhi end. Cost of both these were added to the TPC.

Losses in initial years due to overestimated projections have opened the way for super profits now. The ‘Magic of Compounding’ is now at work. Dues (shortfalls) as of FY09 end stood at Rs.14,875 Mn. The figure only keeps getting larger as 20% on this would be approx Rs.3,000 Mn while even at the present day satisfactory level of profits; ‘Return’ is about Rs.530 Mn. In fact, it has been estimated and loudly proclaimed by the company itself that concession period “may be” needed to extended to 70 years “unless development rights” are granted to reduce that time period.

It is important to note that no proper standard of traffic estimates. The shortfall between actual and project traffic and revenue in the initial years is given below:

Table: Actual and Projected Traffic and Toll Revenue, 2000-01 to 2002-03


Traffic (Million Vehicles)

Total Revenue (Rs Lakhs)

% (Actual revenue on projected)




















*There were 53 days of operation in 2000-01, Source: Aim Admission Document

Such huge difference between actual and projected figures cast a shadow over both the intent and competence of the parties involved in the planning exercise. When we compare this with steady and stable increase in traffic, the whole scope of arguing “unexpected” behavior or fluctuation in traffic flow falls flat. The table below gives a fairly stable rising traffic and revenue on the bridge:

Table: Traffic and Average Toll per Vehicle

Source: Annual Reports of NTBCL

The traffic has grown from about 17K vehicles (ADT–Average Daily Traffic) in 2001 to almost 100K in 2009, a CAGR of about 24%. Average Toll realization per vehicle has also grown handsomely from 2005-06 as can be seen in the chart above. It is inconceivable that such a stable trend in traffic flow could not be estimated with acceptable degree of error.

Second issue of importance is that concessionaire has been absolved of almost all the risks involved in the project. The whole argument behind BOT-Toll model is that it spares the government from risks which are then borne by the private partner. But here we see that concessionaire has been guaranteed 20 % rate of return. And shortfalls in the revenue will be added to TPC which is to be recovered with profit. But the story does not stop here. Under the Concession Agreement, the Company has the ability to request NOIDA to grant it development rights over the land surrounding the Delhi Noida Toll Bridge which is not anticipated to be required for the operation of the Delhi Noida Toll Bridge. The Company may request the grant of development rights if the Independent Auditor upon reference by the Company determines that there has been a shortfall in the toll revenues derived by the Company from the Delhi Noida Toll Bridge project. In fact, Company has requested the grant of development rights under the Concession Agreement and got the ‘in principle’ approval dated 16 May 2001.

Company has a leasehold title on approximately 99 acres; 65 acres on the Delhi side of the bridge and remaining on the Noida side. These lands are not required for the operation of the toll bridge. A valuation study by Jones Lang LaSalle in 2004 estimated the potential value of this land at $82 million if it were developed. The Company is so sure of it that it has already acquired a wholly-owned subsidiary, DND Flyway Limited, with the intention that this subsidiary would undertake any future exploitation of any development rights granted to the Company. The Company has begun to liase with real estate developers in addition to various Government departments, to explore the ways in which the Company could commercially exploit the land. It believes that the association of a leading real estate developer will provide impetus to the process of procuring development rights. The realization of development income in the near term is contingent upon receipt of final government approvals and the nature and extent of developments permitted.

All this practically removes all the risks which should have fallen upon the concessionaire. And like TPC, the provision of development rights too is ambiguous. Although it is given that an Independent Consultant (IC) will assess the shortfall and recommend the granting of developmental rights, it is nowhere mentioned that at what level of shortfall this provision will be invoked. On what basis would the Auditor decide whether an extension to the concession is unlikely to generate “sufficient revenues” to recover Total Cost of Project and the necessary Return? Also, what will be the proportion of revenues from developmental rights, increase in tolls and extension of concession period in compensating the shortfalls? And what will be the monitoring provision of the revenues accruing from such developmental activities?

Since, these developmental activities will be undertaken by concessionaire or other real estate developers (to whom NBTCL may sub-lease the land) the question arises that who will retain the ownership of structures erected after end of the concession period? Will Noida buys it or private developers will retain it after paying for land? Anyways even if they will compensate NOIDA, it will amount to anarchy in use of scarce land resources in such an important economic hub of the country.

The company has already bagged land lease to build Mayur Vihar link to augment the toll revenue which was to be constructed in accordance with the Debt Restructuring Agreement. Besides this the Concession Agreement contains no competition clause. It compels NOIDA, Delhi & U.P Govt “not to propose, recommend, implement or permit to be implemented without prior written consent of the Company (which is not to be unreasonably withheld) any toll-free bridge or other service network, which does or does not involve the collection of tolls, fee or other charges or fee or other charges which are lower than the fee being charged on the Delhi Noida Toll Bridge and which spans across the Yamuna river within the area between the Okhla Barrage to the south of the Delhi Noida Toll Bridge site and the existing Nizamuddin Bridge to the north of the bridge site for a period of 10 years or till the Delhi Noida Toll Bridge achieves full rated capacity (With Delhi government partial capacity of 60%), a peak hour movement of 16,000 passenger car units, whichever is later.” This effectively grants the NBTCL a monopoly right over road infrastructure. The most quoted argument in favour of private participation is to remove/dilute the monopoly enjoyed by the state by bringing in competition which will increase efficiency. But we see that here (and in most PPP) no completion clause is the first one to be demanded and granted!

In fact, NTBCL issued a legal notice to PWD, Delhi Government and contractor of under-construction Kalindi Bypass, on 15th December 2005, asking them to stop the work. It was argued that Kalindi Bypass would affect the traffic flow to the Toll Bridge. It proposed to re draw the plans such that its commercial interests remain unaffected. Kalindi Bypass was built after a delay with re-alignment in consultation with NTBCL.

Under provisions of termination of the contract in event of default, in all cases it is NOIDA which ends up paying the concessionaire even if it is the concessionaire who terminates the contract. The concessionaire does not even have to bear the risk of natural calamity. Moreover, no distinction is made in terms of compensation between a concessionaire event of default which occurs prior to entry into operation of the bridge (i.e., before construction has been completed) vs. one that occurs after commercial operation has commenced (i.e. post-construction). Therefore, even the risks associated with the construction phase were borne by the NOIDA and not the concessionaire.

Thirdly, it is not clear that what standards/process was used to decide upon the rate of return. Since, it was a negotiated award, there should have been a pre-determined benchmark and process to decide the rates as same cannot be discovered via a competitive bidding in this case. The NTBCL has been giving much higher rate of return to the equity holders as rate is determined on the basis of TPC. The interest rate on debt has been reduced following the Debt Restructuring Agreement, which means the margin between the average interest rate payable on the company’s Term Loans (9.5%) and the assured return of 20% would accrue as an additional return to equity holders. In addition, any increase in total project cost (e.g., due to shortfalls in returns) would result in higher returns being due to the concessionaire (since the base upon which returns are due would increase). As the amount payable to debt is fixed, the returns allocated to equity would increase disproportionately. This despite the fact that concessionaire has undertaken practically no risk in this project.

Fourthly, for Operation and Management (O & M), Intertoll Management Services BV, Netherlands, a 100% subsidiary of M/s Intertoll Holdings (Pty) Ltd., South Africa, has been hired in December, 1998. The O&M contract has three distinct components.

  • Fixed equipment supply including systems hardware, related software, and traffic & telecommunications systems.
  • Periodic maintenance including road surface overlays, replacement and maintenance of bridge equipment and
  • Toll collection and management.

The fees payable to O&M Contractor are entirely variable for the first 10 years and for the rest of the period a substantial portion of the fees is linked to the actual number of users of the facility. This has been done to provide an incentive to the operator to effectively collect tolls. The maximum permissible leakage specified in the O&M contract is 0.1% and anything beyond that will be compensated by the O&M Contractor. In addition, Intertoll’s 8.64% has equity stake in the Company which provides additional incentive for proper discharge of duties. Therefore, the risk of leakage of traffic either due to under reporting of fees or due to non-payment of fees by certain users too has been transferred to another party. NBTCL will only pay for the major repair work, which, we have already seen, will become part of the TPC. The question arises, if it is the government which is taking all the risks, why couldn’t it construct road and hire a private player for the O & M which has surely been a major problem with government agencies?

It can be clearly seen that, whole PPP is designed for the enrichment of the concessionaire without it taking any risk. From deciding the base for calculation of rate of return to deciding rate of return, nowhere a clear and standard procedure was followed. Concessionaire gets public land for “free” for constructing a project for public good but has the unrestricted right to mortgage its interest in the project assets, including the project site. This, plus, the provision of more lands for developmental rights and constructing link roads to augment its toll revenue. But the list does not end here.

IL&FS, a project sponsor, was fully involved in conceptualizing the project and as a member of the steering committee that decided that the project should be implemented by a corporate entity promoted by it. It is also one of the lenders to the concessionaire and a major shareholder in the company. It has a major say in decision making regarding the constitution of oversight board, Independent Consultant and Auditor etc which are provided for by the concession agreement to ensure proper compliance with the agreement and prevent frauds. It is like saying, let me award the project to myself and then let me audit/verify the implementation and operations as well.

In this case the final power to determine the user fee/toll is vested with the concessionaire unlike other projects where it vested either with the government or with the joint committee of both. Taking full use of this privilege, concessionaire has indexed the toll rates to CPI rather than WPI which reflects inflation in its costs more closely. Also, debt is fixed in nominal terms; hence the real value of debt repayments declines with inflation and there is no need to index the share of revenues allocated to debt repayment to inflation. Therefore, there is no reason for tolls to reflect full impact of inflation. But exactly same is happening leading to period hike in toll rates. It has led to wide spread discontent among the users and has even forced authorities to intervene.

All this while concessionaire continues to enjoy profits without any risk as shown in the table below:

Table: Earning and Profit of NTBCL

Source: Annual Report of NTBCL

And is almost sure of getting developmental rights on land, potentially worth billions of rupees after development, along with extension of concession period to 70 years!

No wonder Delhi-Noida Toll bridge is seen as the model PPP projects by developers, the project which confirmed the viability of the PPP in road sector. It is the only toll road to be listed on the stock exchange.

The DND brings out the traps in which nation may fall while adopting the route of the PPP for road development. It is a direct outcome of the corruption and weak institutions for implementing PPP and other market based approaches. As it was one of the first such projects to be undertaken, the lack of any coherent policies, clear guidelines for investors and government agencies, lack of clarity about government support and risk sharing framework were the main cause of this. Also, unpreparedness and lack of capacity of the government agencies can also be blamed. But since then several corrective steps have been taken.

In 2005, it was decided to come out with a new and clear policy regime regarding PPP. As a result a new institutional framework has taken shape. Government has come out with a Model Concession Agreement (MCA) for PPP projects. It has also put forth standardized samples of other documents like Request for Qualification (RfQ) and Request for Proposal (RfP). These have been prepared separately for large and small projects, BOT-Toll and BOT-Annuity models. Since, 2007, all contracts are being awarded on the basis of MCA which has considerably removed confusion regarding the bidding process and made the process more streamlined. It has also reduced the scope for arbitrariness in the contracts. Dispute resolution is governed by the 1996, Indian Arbitration and Conciliation Act, it incorporates UNCITRAL provisions.

PPP has been integrated into the planning process itself. Government has taken steps to facilitate fast clearances of various kinds like environmental clearance. Government has also taken responsibility of land acquisitions and all the costs associated therein. A major restructuring of the Ministry of Road and Highways and NHAI has been undertaken to make it more oriented towards the private sector participation. Capacity building of government agencies, both at the centre and state, is being sought under the Asian Development Bank’s Technical Assistance Facility and various other programmes of other agencies like World Bank etc. One hopes that mistakes of the earlier projects like DND will not be repeated but a detail study of more individual projects is required to affirm that nexus between corporates-bureaucrats-politicians is broken.

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Abhinav Prakash Singh

Abhinav is a Doctoral Scholar in Economics, JNU. He has done his Masters in Economics from JNU and Economics (Honours ) from Hindu College, University of Delhi. His is interested in politics, history, economics, religion and hopes to grasp the reasons behind rise and fall of civilizations.

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