The Coimbatore Bypass Road Project

INTRODUCTION
India has the second largest road infrastructure in the world with a road length of 3.3 million
km. There is, however, a high difference in quality and road conditions throughout the region.
Since 1998-9, the Indian transport industry has managed 870 billion tonnes of freight km
(btkm) and 2.450 billion passenger km (bpkm) of passenger transport. By this, the road
sector held 566 btkm (65 per cent) of freight and 2,132 bpkm (87 per cent) of passenger
traffic. The project included the construction of a 28-km long two-lane bypass route, the 32.2
m new Athupalam bridge over the river Noyal, the Chettipalayam Tamilnadu rail bridge and
the fix of the old bridge at Athupalam, all in the state of Tamilnadu. Larsen & Toubro (L&T)
are allowed to receive and maintain payments from users of the new and old Athupalam
bridges.
CASE BRIEF
The Coimbatore Bypass was the first road project to be initiated on the basis of BOT1 (build,
operate and transfer) in South India. The plan was effort, require the involvement of the
private sector and the levying of tolls on consumers to ensure viability in the long term. The
road is between the Neelambur on the Salem side of NH-47 Tamilnadu and Madukkarai on
the Palghat side of Kerala.
REASONS FOR FAILURE FROM THE CASE
Issues Raised by the Coimbatore Bypass Experience

After four years of project completion, LTTIL has reported a cumulative loss of Rs 12.6
crores. Was the traffic itself less than expectations or was the primary source of non-
compliance with the toll? Overall experience reveals that the use of the Athupalam Bridge is
strong and the construction of the bridge has become a huge comfort for users.

1. Project structuring: only one bid for the project from a private entity. This was largely
attributed to a deficit in project structuring, both in scope and in financial terms.
LTTIL bids for the project on the basis that the Athupalam Bridge segment be
bundled with the bypass segment to make it financially viable.
2. Public consultation: no demand or ability to pay polling has been made or any action
has been taken to plan customers for a high-quality facility that saves on maintenance
costs such as time, electricity, wear and tear, etc. There was no previous public
 consultation or dialogue with opinion leaders prior to the vote to charge the bridge.
3. Biased case of building: revenue estimates were projected to be in the bypass and
bridge ratios of 40:60, while spending in construction was in the ratio of 87:3. The
users of the bridge were expected to cross subsidise the users of the bypass.
4. Delays due to queuing: the tolling on the bridge has its attendant queuing time and
waiting time. This was perceived by the public as a hindrance instead of an increased
quality of service.
5. Lack of projection and planning-
o Local traffic: Athupalam Bridge was built near the city limits of Coimbatore.
The amount of local traffic has been very high. There was a lack of desire to
pay tolls, particularly because they had not charged tolls for the bridge
crossing prior to the completion of the new two-lane bridge.
o Multiple journeys: the arrangement called for the collection of tolls only on
the basis of single journeys taken over the bridge. It dismissed people who
made several trips a day. These users have considered trip wise toll charges an
costly affair.
o Current toll: the arrangement provided for the selection of current two-lane
bridges. Since the completion of the current two-lane bridge, each bridge was
used uni-directionally. Public objected to the toll being levied on the current
bridge for which LTTIL had made no extra investment.
o Enforcement: local taxis operators, bus operators and commercial fleet
operators formed groups to demonstrate against the collection of tolls and
declined to pay tolls. Despite public protests, toll collection persisted, but with
poor / low compliance. LTTIL appealed to the government to amend the
Motor Vehicles Act adequately in order to allow a private entrepreneur to
impose toll collection and control traffic flow for drivers refusing to pay toll
charges.

DATA ANALYSIS
Analysis of Toll Collections at Athupalam Bridge from December 1998 to July 2000
Sl Type of Amount Amount Amount Actual amount
no vehicles collectableas per collected on collectable if collected by
agreement vehicles basis concessional toll LTTIL
(irrespective of was accepted (as
no of trips per the Minister’s
made) suggestions)3
 1 CJVs 20,486.87 18,432.16 20,422.71 9574.81
2 LCVs 18,272.99 16,757.04 18,240.50 4089.18
3 Buses 32,083.52 24,136.58 28,937.71 1482.01
4 Trucks 39,753.86 37,873.97 39,656.07 11589.1
5 MAVs 2,763.79 2,748.45 2,763.79 1836.04
  Total 1,13,361.02 99,948.20 1,10,020.78 28,571.14
  Loss   -13,412.82 -3,340.24 -84,789.88

For the year 2001-2, the company announced a loss of Rs 5.9 crores, leading to a net loss of
Rs 12.6 crores[LTTIL Annual Report, 2002]. There were a minimum of 2,180 journeys a day
for around 230 buses. The company estimated that Rs 20,000 will be lost daily on public
buses alone. LTTIL also incurred the cost of deploying the officers. It billed Rs 53 lakhs for
2001-2 defence charges. .LTTIL was forced to produce additional securities by financial
institutions. Interest payment worked out to be R 9 cr per year.
SUCCESS FACTORS FROM THE RESEARCH PAPER
1. Cost performance- It includes the extent of: adverse climatic and economic
conditions; unfavourable project specific attributes; top management support;
monitoring, feedback, coordination, conflict and knowledge of the project
participants; and reluctance to make timely decisions. Of these, coordination amongst
project participants was found to be the most significant of all factors, having a
maximum positive influence on cost performance.[ CITATION Iye05 \l 1033 ]
2. Stakeholder management - Construction firms in general strive to include a variety of
partners in large development ventures. In these cases , it is important to handle and
provide the stakeholders with sufficient assistance. This paper has therefore carried
out an observational analysis on its management by way of the sample survey carried
out by different engineers and managers. [ CITATION Goo17 \l 1033 ]
3. Clarity in the contracts – It is needed to reduce the dangers of delaying and
overruning expenses, the government must ensure successful land procurement and
relocation. The state should have an appropriate interchange rate structure and define
toll adaptation frequencies to ensure the protection of income flows, and help to
forecast benefit to road developers. Also to minimise repair costs, rigorous fines for
vehicle overload should be levied. Project planners should make use, by building the
emergency budgets, of an acceptable mix of funds that is acceptable for producing
project income and should be planned well for overcoming costs. [ CITATION Thi19 \l
1033 ]
 4. Project Planning –In the study examine the tensions within government-funded
initiatives that had detrimental consequences on cleaner development and outside
stakeholders. The results show that the construction sector is faced with a crisis in
fast-growing economies. The major sources of tension have been disclosed, including
insufficient planning, regulatory challenges, monopolies, multiple goals, a
socioeconomic climate and various interests. In a preferential order, 1) mitigation, 2)
agreements, 3) mediation, (4) settlement, 5) avoidance and 6) lightening, were the
suggested successful dispute resolution techniques. [CITATION Nan \l 1033 ]
5. Flexibility in the contract- Research recommend that the government should consider
its effect on the project in planning government guarantees. This paper also suggests
that government guarantees can be used by private developers as a mechanism to
attract investors in road quality and road capability. For eg, based on our model
results, if the government is to increase the standard of the road, it should include a
price compensation guarantee or a minimum traffic guarantee with a low level of
guarantee for the private investor. The idea that auction lowers the toll is known for a
long time. The findings of our model also confirm this acknowledgement. So, where
government assurances have a smaller improvement in the toll, then auction can be
preferable. [ CITATION Zhu15 \l 1033 ]

GAP IN THE PROJECT MANAGEMENT

1. There is no clarity between the government and the developer about how to solve the
issues, whether the project is faced with unexpected issues. This will be a big great
incentive for private players to participate in road construction projects. Other specific
disincentives are perceived risk due to difficulty in forecasting traffic demand and
ability to pay.
2. No response from the government on steps to ensure compliance with the toll or to
compensate for losses. If the government fails to respond, potential public private
road projects will be in jeopardy, as already feared with the proposed BOT bridge
projects.
RELEVANCE TO THE BUSINESS SITUATION
In view of the above, the outlook appears to be enhanced on annuity rather than toll related
projects. Annuity-based projects include projects in which the BOT user earns profits either
on the basis of traffic levels or in a fixed sum. While this theory explicitly tackles the
inability of the consumer to pay bills, the notion of demand is distanced from the economic
principle of transaction fees.

REFERENCES
Goodenough D. Oppong, A. P. (2017). A review of stakeholder management performance attributes
in. International Journal of Project Management .
Iyer, K. J. (2005). Factors affecting cost performance: evidence from Indian construction projects.
International Journal of Project Management, 23(4):283-95.
Nannan Wang, M. M. (2019). Conflicts concerning construction projects under the challenge of.
Journal of Cleaner Production.
Thi My Thanh Truong, H. F. (2019). Success factors for financial sustainability of toll road projects:.
Trasportation Research Procedia.
Zhuo Feng, S.-B. Z. (2015). Modeling the impact of government guarantees on toll charge,.
Transportation Research Part A.