Patna, Nov. 18: Improved law and order and a substantial increase in traffic movement across the state have infused fresh confidence in private investors.

Bullish about the profitability of investing in the Bihar road sector, Andhra Pradesh-based construction company has quoted Rs 100 crore below the base price quoted in the tender floated for the 107-km stretch of National Highway (NH) 28A between Muzaffarpur and Barauni.

The Centre will now be actually earning Rs 100 crore in the next 20 years, as the company has offered Rs 100 crore as “premium” for the project. The company had proposed to construct this road at just Rs 256 crore against the base price of Rs 356 crore.

“It is the first time a private company has quoted a rate much lower than the base price in Bihar,” said an official of the National Highways Authority of India (NHAI).

NHAI had invited bids from private investors for constructing the 107-km stretch under build-operate-transfer (BOT) mode with the investor getting the right of toll collection from users for a period of 20 years.

The firm, which has been awarded the work on the basis of competitive bidding, in its bid, offered to construct the road for just Rs 256 crore and offered to pay the difference of Rs 100 crore over a period of 20 years, implying an annual payment of Rs 5 crore to the NHAI, which works under the Union ministry of road transport and national highways.

“Rs 100 crore would be the minimum amount that the private firm would pay us which may go up if the toll collection from the said road is higher than what has been projected in the project document,” a senior NHAI official, requesting anonymity, told The Telegraph today.

Construction work on the aforesaid road would start from March next year with a 30-month deadline. The two-lane road would be 12m wide.

The NHAI official said it was the first time in Bihar that a NH project, being executed under BOT mode, would bring premium payment to the road authority. In all other projects (see table), being executed under the same mode, the NHAI had to pay money from its coffers under the viability gap funding.

Viability gap funding is the amount paid by the government (the Centre in case of NH projects) to private investors for making the project viable. Private investors place bids, demanding a certain percentage of the project cost as viability gap funding on the basis of their calculation of the toll collection for the period they are given the right. According to rules, a maximum of 40 per cent of the project cost can be given as viability gap funding for the projects being executed under BOT mode.

The NHAI official said: “The decision of the state government to sign the ‘state support agreement’ too appears to have had a positive impact on private investment in the road sector.”