OUTER AREA GROWTH CORRIDOR OF THIRUVANATHAPURAM

A stepping stone towards ‘New Kerala’

Genesis of the Project

Government of Kerala in 2002-03 approved a set of projects under Capital Region

Development Project (CRDP) for the planned development of the Capital City. These
projects are under various stages of implementation such as “ Trivandrum City Road
Improvement Project” comprising development, operation and maintenance of
approx. 42 kms of important city roads.

The Government has now decided to take up additional projects as Phase-II to

supplement the above with the objective of sustainable improvement of urban
environment of the Capital Region and to take care of the future development of
the Capital City.

Government of Kerala (GoK) through the Phase-II i.e. Capital Region Development
Project (CRDP-II) has taken up city-region infrastructure projects such as:

• Improvement of existing roads, Construction of ring roads and link roads;

• Preparation of parking policy and building parking places;
• Cleaning of waterways and water bodies;
• Environmental improvement of Markets, Shopping Streets and Parks;
• Greening the city by planting 1 lakh trees in 5 years;
• Improvement of connectivity (Broadband, Wi-Fi, etc.);
• Revitalization of Heritage commission, highlighting of Landmarks and
distribution of Music and Art Circuit;
• Development of alternate source of energy, provide UG cabling and ring
main, etc.
• Providing drinking water facility (100%) for all
• 100% coverage of sewerage system

The High Power Committee under the Chairmanship of Hon’ble Chief Minister has
decided to take up four priority projects, these are:

• Improvement of existing roads, construction of ring roads and link roads

• Preparation of parking policy and building parking places
• Environmental improvement of markets, shopping streets and parks
• Greening the city by planting 1 lakh trees in 5 years

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Need of the Project

Social Need

Kerala has the advantage of having a higher share of educated and professionally
qualified youth in its population which far exceed the national average of India.
Over the past 3 decades, technically qualified and skilled youths of the state has
been taking advantage of the high employment opportunities in Middle East which
have been recording a steady decline for past years and expected to further
reduce in the next decade. Therefore the state needs to act urgently to accelerate
public and private investments in employment generating activities to help generate
adequate earning opportunities for the growing up generation.

Further the financially sound 1stand 2nd generation Non Resident Keralites in Middle
East will be looking to return in the next decade due to retirement and
retrenchment who will have investible wealth and adequate entrepreneurial and/or
employable skills. Unless the state prepares adequate avenues for deployment of
their wealth and experience, the state would lose such resources to other
competing markets.

Geo-spatial and ecological Sustainability

The state also faces a unique challenge to find a sustainable development model
given its high population density, high land cost, and vulnerable eco system. The
state witness multi faced development pressure which needs to be balanced and
directed strategically to minimize opportunity cost for development activities and
ensure sustainability of the natural ecosystem of the state.

Economic Need

Kerala has comparative advantage in attracting investment in high skilled- high tech
sectors such as Aerospace electronics, Robotics & Instrumentation, Information
Technology, Media and Entertainment, Healthcare, Tourism and Hospitality sectors.
Investments in these sectors would enable adequate network effect in generating
indirect and induced employment opportunities across the state. However the state
has to compete with the several investment regions in developed and developing
world by offering world class infrastructure, high degree of ease of doing business,
competitive cost of operations and world class quality of life to attract global
investment in these sectors.

The state economy is currently depends heavily on consumption based indirect

taxes which have a higher price elasticity and hence susceptible to high degree of
variation across economic cycles. In order to achieve balance, it is necessary to

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 broad base the service sector economy which will help generate multiple economic
activities within the state. State intends to broad base its revenue base by through
appropriate measures based on value enhancement to beneficiary and socio-
economic equity.

Therefore the state has to demonstrate a viable, scalable and replicable

development model which can serve as a benchmark for the future economic
development of the state and conceptualized a potentially large area development
project “Outer Area Growth Corridor”.

Project Objective

Creation of a Special Investment Region which will serve as a world class hub for
multiple economic activities and a vibrant socio-cultural habitat offering a
sustainable quality of life matching the best global standards.

Outer Area Growth Corridor Appreciation

Outer Area Growth Corridor project is perceived as “A new township built alongside
Outer Ring Road (ORR) similar to Special Economic Zone with proper Master
Development Plan & special Development Regulations to attract Investments and
Talents, has been taken up to achieve the following objectives:

a) Accelerated, systematic and environmentally responsible development of

peripheral areas to improve the quality of life of residents in the outer areas of
capital region
b) Offer direct connectivity and shorter commuting time from outer area and
adjoining districts to the major economic hub of capital region-Vizhinjam Port
and thus help decongest the core city area by reducing transit traffic.
c) Provide adequate support infrastructure to spur ancillary economic activities to
the major economic hubs at Vizhinjam (southern side of city) and Technopark-
Technocity complex (northern side of city).

Project Location

The Outer Ring Road is a green-field project on the Outer Area of

Thiruvananthapuram City on the eastern side, for a length of about 78.880 Kms.
The location plan of the project road section is given below.

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Project Components

The proposed
Outer Area
Growth Corridor
comprises of
following

a) A transit
corridor inter-
connecting all
National and
State
Highways
leading to capital city of Thiruvanathapuram with the upcoming International
Container Transshipment Terminal (ICTT) at Vizhinjam.

i. ORR is initially being designed as a 4-lane carriageway with 6-lane

structures (expandable upto 6-lanes as per traffic warranty in future)
freeway with controlled access through 10 meter service roads on both

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 sides connecting the main carriageway with all leading radial and arterial
roads of Thiruvananthapuram city and the other major district
roads/other district roads in the outer areas of the capital region.

ii. ORR starts from National Highway no. NH66 (old NH 47) near Paripally
(from Navaikulam) and
end point is Vizhinjam
Bypass/NH66 (direct
connectivity to
Vizhinjam Port) with a
link to Mangalapuram.

iii. The
length of the ORR is
about 78.880
Kilometers, i.e Trunk
alignment from
Navaikulam to Vizhinjam: 65.630 Kilometers and Link alignment to
Mangalapuram is about 13.250 Kilometers.

iv. The right of way (RoW) for the ORR is 70 meters. RoW area of about
600 hectares shall be acquired for the ORR.

v. The land use along the

stretch is of mixed in
nature with agricultural,
residential, cultural and
commercial.

vi. Major built ups along the

project road is limited to
locations where proposed
highway crosses the
existing roads. 2 nos. of
Major Bridges, 13 nos. of
Minor Bridges/Viaducts, 14 nos. of PUPs, 36 nos. of LVUs, 21 nos. of
VUPs, 7 nos. of Flyovers are proposed for the ORR.
vii. The proposed ORR alignment crosses an existing railway line near
Balaramapuram.

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 viii. The initial screening report (ISR) for ORR has been completed, the
Detailed Project Feasibility Report is in progress is expected to completed
by end of July 2019.

b) A Special Investment Region comprising geographic area of about 400 sq. km.
(spread along 2.5 Km
on either side of the
transit corridor) will
have mixed land use,
public and private
land ownership with a
detailed Master Plan
and Planning
Regulations to guide
public and private
development activities
in a systematic and
sustainable manner.
Government also proposes to bring a special legislation in the form of SIR Act
which will help improve the
ease of doing business and
investment competitiveness
of the Project to the
desirable global standards
to attract maximum
possible investment in
employment generating
economic activities in the
project area.

c) Multiple “Development Zones” (within the SIR Area) which will act as Nuclei of
economic activities and a strong growth driver to SIR and State.

Comparative Advantage of Project Area

The location in the southern tip of India serves to give it considerable advantage in
marine logistics being closest to the International sea route and the upcoming ICTT
at Vizhinjam is expected to boost the trade related economic activities.

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 The Project area has lower population density thus offering adequate vacant land
for development activities. It has a fair degree of social infrastructure thus
reasonably lowering the development cost. The area also has less vulnerability to
ecological systems. Thus the project will have higher benefit –cost ratio (BCR).

Proximity of the project area to the capital city helps in easier administrative
facilitation which is crucial for the success factor for project.

Apart from proximity to upcoming ICTT, Vizhinjam, the project location can derive
benefit from its proximity to the aero-space center of VSSC, IT Hub of Technopark,
and many major tourist locations including Kovalam, Varkkala, Poovar and Ponmudi
in the Capital region.

Further the several reputed higher education institutions in the capital region would
help offer the much needed knowledge networks required for a high tech economic
city.

Presence of many good quality health care institutions and multiple cultural
institutions in capital region would help compliment the social infrastructure to
achieve the desired levels of quality of life.

Project Outlay
The project envisages a capital expense of approx INR 20 Bn for construction of
the transit corridor. In addition the projected cost of land (about 490 hectares) for
Right of Way (60 meter for road section and 10 meter for green cover area) of the
transit corridor would be INR 30 Bn. The cost of land (about 500 hectares) for
multiple development zones identified would be INR 20 Bn and the cost of public
infrastructure in the SIR would be INR12 Bn.

Thus the expected total capital outlay for the project over the expected
development period of 10 years would be approx. INR 82 Bn

Project Financing Framework

A project of such significant investment will require skillful financial engineering to
help cost effective resource mobilization and financial sustainability. The proposed
financing strategy aims at mobilizing both public and private resources using cost
effective financing instruments and use appropriate value capture framework to
finance the project cost

Capex for the transit corridor has been agreed in principle by MoRTH/NHAI to be
funded under the Bharatmala scheme of Government of India and value capture
financing shall be from a mix of user fee and infrastructure development charges /
property tax revenues for the access controlled corridor.

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 The land cost is expected to be financed through an innovative scheme of Land
Bonds which will aim to finance the cost of acquisition by capturing the value
enhancement in real estate and additional economic activities generated by the
project.

Land Pooling approach: land parcels owned by individuals or group of individuals

being legally consolidated by transfer of ownership rights to the 'Land Pooling
Agency' which will later transfer the part of the land back to the owners after
undertaking the development activities and those land owners with large land
parcels will be actively promoted to help interested land owners become
entrepreneurs by making land availability to investors/developers to engage and
implement joint-development projects.

Strategy for Infrastructure Development in SIR

Role of Development Partners

Government of Kerala is keen to partner with Development Finance Institutions to
help mobilize adequate resources to complement the public funds. The Government
is also keen to invite globally reputed agencies to develop and/or operate
infrastructure and utility services in multiple formats including EPC, Hybrid Annuity
model (HAM) and DBFOT.

Potential Focus sectors for SIR

Attracting investments in sectors suitable to the socio-economic credentials of
Kerala is essential to build sufficient avenues for wealth creation especially to the
next generation. Kerala has certain comparative advantage to attract investment in
high skilled, fast growing and technology intensive sectors such as aero-space
electronics, information technology, robotics & automation, trade & finance, food
processing, Tourism and Hospitality sectors.

Essential pre-requisites to attract investment

To enable the state successful in attracting the investment, we need to ensure
efficient business infrastructure, adequate “ease of doing business” regulatory
environment and reliable social infrastructure to offer quality of living standards at
par with other competing markets globally.

Important learning from Kerala’s experience

Kerala has a history of developing most of the infrastructure through Government
funding and it also has some good agencies that can deliver provided their
limitations are addressed properly. Many Government agencies have constraints of
funds , limited access to technology and first world experience .In many areas
Kerala still maintains the near monopoly position for Government agencies in

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 infrastructure sector. Considering all these points we need to create a new working
model for Kerala.

Successful experiences of CIAL, KIAL and KMRL demonstrates the crucial role of
public sector in creating capital intensive infrastructure.

However the service level standards offered to the public user by infrastructure and
utility services are important to ensure reliability and adequacy of social
infrastructure. Role of private sector is also important in attracting commercial
users. It has been experienced in most cases that private sector has an edge
over public sector in providing cost efficient service quality standards.

Strategy to Develop efficient Business infrastructure

Infrastructure development requires sizeable long term capital. Typically the cost of
capital for public sector is lower than that for private sector. Therefore public
sector investment in infrastructure would be more cost efficient than private sector

In the case of infrastructure, typically risks are front loaded while returns are tail
loaded. Regulatory and political risks are high during the initial planning stage of
the project prior to financial closure. While private sector would be averse to
assume such risks, the government/ public sector is better positioned to manage
these risks better than private sector. However operational risks such as
construction and maintenance risks are generally better managed by private sector.
Therefore a strategy combining the relative efficiencies of public and private sectors
would be most effective

Implementation Framework Proposal

It is proposed that public sector may take the lead in creating critical infrastructure.
To have the desired level of focus, efficiency and accountability, it is proposed that
each of the critical infrastructure may be created through separate Special Purpose
Vehicles (SPVs) under the administrative control of respective departments of GoK.

Thus five SPVs may be formed each under the respective administrative department.
a. Roads - Under PWD
b. Solid Waste Management - Under LSGD
c. Energy - Under KSEB
d. Drinking Water & Liquid Sewerage management - Under KWA
e. Communication Network : Under Department of IT

Human Resources:
Necessary technical and managerial manpower from respective department may be
deputed to these SPVs. SPVs may appoint professionally skilled staff on long term

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 contract for critical functions such as finance and marketing or hire the services of
professional agencies based on work requirement.

Capital Structure & Operation Plan:

Each SPVs may be formed initially as wholly owned companies with an authorized
capital of Rs 100 Cr and a paid up capital of Rs 10 Cr. The SPVs will complete
the necessary planning process such as acquisition/ pooling of developable land,
preparation of site specific master plans and procurement of basic regulatory
approvals from Govt authorities.

To meet the land cost, the GoK may authorize issue of Land Bonds which can be
managed by an existing institution of the state such as KFC/KSIDC.

Capital Expansion & Financial Closure of SPVs:

Completing the riskier initial planning phase by GoK, the project would be able to
offer sufficiently higher risk-reward ratio to attract private investment in execution
phase. Accordingly GoK may then dilute its equity up to a minimum of 26%, by
infusion of institutional and private capital into those SPVs and achieve financial
closure with a mix of debt and central sector funds (where available) as per the
approved project financing plan under each SPV.

Expected Economic/Benefits:
The benefits associated to the society from a project like ORR in the OAGC are:
i. Vehicle Operating Cost Benefits
ii. Vehicle Operating Time Benefits
iii. Benefits from reduction in Road Accidents
iv. Multiplier Benefits from Users of the ORR
v. Benefits from Private Investments along the ORR
vi. Employment Generation & Additional Economic Benefits from Implementation
of the ORR Project

In the short run (2022-2026), the ORR Project will:

✓ Directly employ about 9,400 formal construction workers;

✓ Stimulate about 76,357 additional informal jobs in the region;
✓ The ORR will lower the state’s unemployment rate directly by 0.18% (183
days or more in a year) and by 0.76% (30 days or more in any economic
activity in that year) percentage points.
✓ Add about Rs. 5,310 crores to the Economy of Kerala;
✓ Generate Rs. 264 crores per year in the state and local tax revenue; and
✓ Reduce travel time, kms, and congestion.

In the long run, the ORR Project will:

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 ✓ Spur economic development;
✓ Create about 3.5 lakh to 5.5 lakh jobs;
✓ Increase economic output of Kerala by Rs. 16,527 crores;
✓ Connect labour to employment opportunities;
✓ Support the region’s growing population;
✓ Lower automobile pollution in the area; and
✓ Demonstrate a willingness of the government to partner with the private
sector.

The project puts ORR residents to work in high-end jobs with good pay, spurs
economic development, and supports the outer region’s future population. The
enduring benefits of the ORR outweigh its upfront costs.

Note: All pictures used in this report are for representative purpose only

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