Support Loan Concept for the Viability of a BOT Road Project

Abstract

This paper presents the viability of a Build Operate Transfer (BOT) road project based on support loan concept. Interest of debt is one of the most important parameters for the viability of a project. In India, interest rate is in the range of 13 -18 % annually for infrastructure project. The road project with low traffic and high project cost may be infeasible. In order to make the project viable, support loan concept has been proposed in this paper. This paper presents the changes in values of various financial viable parameters with the use of support loan with a real case study. This paper presents the results of normal debt and support loan with different interest rates and different payback periods and develops a methodology for support loan for the viability of a project. It has been found that longer payback period is also more beneficial. Financial return is more with low rate of interest of debt. The real case study has been compared with support loan and subsidy provision and found out the best option after projecting both values at the end of payback period. It has been found that support loan provision is more beneficial for the government instead of subsidy option for the viability of a project. Support loan concept is recommended for the viability of the project.