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In Depth

High-Velocity Roads To Match India's Traffic Needs

Sramana Mitra
6th Oct 2015
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In this series, Sramana Mitra shares chapters from her book Vision India 2020, that outlines 45 interesting ideas for start-up companies with the potential to become billion-dollar enterprises. These articles are written as business fiction, as if we’re in 2020, reflecting back on building these businesses over the previous decade. We hope to spark ideas for building successful start-ups of your own. 

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The Confederation of Indian Industry and the Boston Consulting Group estimated that the Indian manufacturing sector would command a market capitalization of $520 billion by 2014, versus $272 billion in 2007. From cars to appliances, computers to cell phones, components to modules, India would need to manufacture relentlessly to satiate this rapidly developing consumer appetite. Yet India’s road system, in 2009, was not even remotely adequate to shoulder the related growth in high-velocity transportation required to move the products from city to city, or port to port.

The road transportation ministry was making progress on a large-scale overhaul of the national highways, but interconnectivity between the national highways was still poor. Furthermore, many regional roads, which would serve as the arteries to move raw materials and products to and from factories, remained in dismal shape. I could not count the number of times I had sat in traffic jams as lorries clogged miles upon miles of road. “The bridge is broken,” the driver would announce, looking at me in the rearview mirror. “Again.”

In response, we formulated a project based on eight-lane toll roads, built and maintained under professional management rather than government bureaucracies, to service the requirements of the manufacturing sector. To service this glut of lorries carrying the country’s, and the world’s, growing demand.

The coal movement alone was huge, with Coal India sprawling across West Bengal, Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Orissa, and Eastern Maharashtra. Beyond coal, Arcelor Mittal, Tata Steel, Essar, Jindal, Ispat, and other steel plants also peppered those states. And Jamshedpur, now in Jharkhand, was one of the largest manufacturing plants of Tata Motors. Add L&T’s cement plants in West Bengal, Orissa, Chhattisgarh, and Western Maharashtra to the mix, and we were looking at a dire need for industrial capacity roadways.

Focused on traffic flow within these seven states, and among industries such as coal, steel, cement, and auto, we set out to validate our premise. First we sat down with each of the major companies doing business in the region and mapped out their transportation routes and requirements. Little gray area arose. It was clear from the onset that they needed good connectivity internally, as well as with the ports of Kolkata/Haldia in West Bengal, Paradwip in Orissa, and Vizag in Andhra Pradesh.

Our plan developed rapidly: build, between 2010 and 2015, a 1,000-kilometer network of roads connecting important nodes of the Indian manufacturing sector. With that in mind, we sketched an ever-evolving map of high-velocity Magic Carpet Roads to match the industrial traffic needs, often bypassing national and state highways, creating shorter, more direct routes.

For example, the connectivity between Jamshedpur and the Kolkata port demanded a direct link. Each month Tata Steel sent 30 to 60 tons of sheet metal to Japanese car manufacturers. But each month, 8-10 trucks would be stuck on this route, delaying the loading of ships, often missing the tide to set sail. As our roads unclogged decades of logjam, truck drivers, once accustomed to watching the sun set from behind the wheel, started discovering the joys of early nights.

We connected the Rourkela steel plants to the Paradeep port in Orissa. We connected the cluster of factories along National Highway 60 with the Haldia port. In Jharkhand, we connected NH-23 and NH-33 at several points to make the flow of minerals smoother. In Chhattisgarh, the region surrounding NH-43 called for several Magic Carpet links.

It was, needless to say, an incredibly expensive project, making financial engineering a key factor. The Transport Ministry offered 50% debt financing under a scheme called Projects of Economic Importance. The debt had a 20-year moratorium lessening the burden of financing charges. Another 25% of the investment came from the Asian Development Bank, under similar terms. Another 5% came from state governments. And the final 20% came as equity financing from Texas Pacific Group and KKR. The total investment: over $10 billion, raised in five rounds, coinciding with advancing phases of the project.

By 2015, Magic Carpet boasted a remarkable network of eight-lane toll roads, with 32 toll gates at each toll plaza to make transitions smooth and fast. Each plaza had three payment modes – human toll collectors for collecting cash or credit card payments, contactless pre-paid smartcards to be handed to the collector, and transponders for automatic passage.

That same year, we entered the project’s revenue generation phase, and since our debts lay dormant through 2030, we were assured a long window to build a profitable, self-sustaining company. And build it we did. We reached the billion-dollar revenue mark by the end of 2019, with revenues growing at 70%. With such profits we began shaving some of the principal off the debt financing long before debt charges kicked in.

The network has not only had a massive impact on the cargo movement in India, it has also greatly eased the urban congestion in Kolkata, Jamshedpur, Ranchi, Kharagpur, Bhubaneswar, and beyond. By diverting cargo traffic that once clogged key access points to those cities, Magic Carpet has made way for the human flow. On average, travel time within our circuit has been cut by a third. Once hour-long journeys now take 15-20 minutes; six-hour trips, only two. The bloodlines of the great tiger are open and flowing.

Looking For Some Hands-On Advice?

I receive many emails from entrepreneurs who want to discuss their specific businesses. I’m very happy to discuss your situation during my free online 1M/1M Roundtables, held almost every Thursday. During each roundtable, up to five entrepreneurs can pitch their businesses and receive my immediate and straightforward feedback.

To give entrepreneurs all over the world access to Silicon Valley’s knowledge, methodology, and network, I founded the One Million by One Million (1M/1M) global virtual incubator. 1M/1M aims to nurture a million entrepreneurs to reach a million dollars each in annual revenue and beyond, thereby creating a trillion dollars in global GDP and ten million jobs.

For those still testing the waters of entrepreneurship, I’ve written my Entrepreneur Journeys book series to inform and inspire. My newest book, Billion Dollar Unicorns, is now available from Amazon.

If you are interested in entrepreneurship topics and my writings, you can follow me here. I hope to publish articles on LinkedIn every week.

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