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Tuesday, Oct 14, 2003

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BOT, the norm now

K.G. Kumar

LAST week was a pretty harrowing one for those Kochi residents who ventured to cross the new Mattancherry Bridge. Unless they were safely ensconced in the comfort of their own vehicles, they would have had to rely on something more fundamental to get across the half-kilometre stretch of concrete and steel — those good old legs bestowed by nature.

Buses — both private and those run by the state-owned Kerala State Road Transport Corporation (KSRTC) have been keeping off the bridge for some time now. Since buses are the principal means of public transportation in Kochi, the boycott of Mattancherry Bridge, a key thoroughfare to the Kochi mainland, has caused considerable hardship for the city's commuters.

And the cause of the boycott? A hike in the toll levied for use of the bridge. The new Mattancherry Bridge is historical, as was the old one, which the Kerala Government wishes to preserve as a heritage monument. The new bridge was constructed on a build-operate-transfer (BOT) basis, and was the first BOT project in the State. It was built in accordance with a tripartite agreement among the Government of Kerala, the Greater Cochin Development Authority and Gammon India Ltd. The agreement allows for the collection of user charges. The notification revising the user fees for various types of vehicles was issued on September 29.

In recent years, the BOT approach has played a growing role in the implementation of industrial and infrastructure projects in developing countries. For these countries, financial markets are shifting the way in which debt capital is raised to fund the development of infrastructure. In the past, debt was raised directly from multilateral and export credit agencies or from sovereign Governments themselves to provide turnkey financing. Recently, infrastructure developers have turned increasingly to portfolio-style credit in the form of capital pools, operating concessions and stand-alone utilities.

In a BOT project, a private company is given a concession to finance, build and operate a facility that would normally be built and operated by the Government. At the end of the concession period, the private company returns the ownership of the project to the Government. The concession period is determined primarily by the length of the time needed for the facility's revenue stream to pay off the company's debt and provide a reasonable rate of return for its effort and risk.

The new Mattancherry bridge was built by Cochin Bridge Infrastructure Company Ltd, a subsidiary of Gammon India, at an approximate cost of Rs 20 crore, and was opened to traffic in the last week of September. Use of the Mattancherry Bridge has long been subject to vexation and litigation. Earlier this year, a Division Bench of the Kerala High Court had upheld the Kerala Road Fund Ordinance 2001, which imposes a user fee on vehicles passing through the newly-built bridge and also allows the builder of the new bridge to collect such fees.

The Bench upheld the Ordinance while dismissing a batch of writ petitions, including the one filed by the bus operators, challenging the legitimacy of the State Government to allow such a toll.

Although the State Government has rolled back the hike, the protests are continuing. Worse, they have been buttressed by the councillors of the Kochi Corporation, staged a day-long strike at the bridge. The tussle over the Mattancherry Bridge toll merely underscores the need for a consensual approach to development projects. Keralites have yet to realise that, as market economics spreads its tentacles, tolls, like user fees and sales tax, will become an inevitable part of life. But, as citizens of a democracy, they certainly do have the right to demand they be consulted before they are slapped with a bill.

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