Economic Feasibility Analysis for Central Expressway Project
Final Report
Transportation Engineering Division Department of Civil Engineering University of Moratuwa
April 2016
Economic Feasibility Analysis for Central Expressway Project
Final Report
Transportation Engineering Division Department of Civil Engineering University of Moratuwa
April 2016
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Table of Contents
1. Project Description ...... 1
1.1. Expressway Network in Sri Lanka ...... 1
1.2. Introduction ...... 1
1.3. Expressway Alignment Selection ...... 2
1.3.1. Trace from Kadawatha to Gampaha ...... 3
1.3.2. Trace from Gampaha to Dambulla ...... 3
1.3.3. Proposed trace for Central Expressway ...... 4
1.4. Economy and Transport Sector Overview ...... 6
2. Traffic Demand Analysis ...... 8
2.1. Traffic Forecasting Model ...... 8
2.1.1. Study Area ...... 8
2.1.2. Base Year Network ...... 10
2.1.3. Future Year Network ...... 10
2.1.4. Assignment ...... 17
2.1.5. Central Expressway Toll Strategy ...... 19
2.2. Forecasted traffic on the Central Expressway ...... 19
2.2.1. Base Case ...... 21
2.2.2. Project Case ...... 21
2.2.3. Scenario 1: Section1 (Kadawatha to Mirigama) ...... 23
2.2.4. Scenario 2: Section12 (Kadawatha to Kurunegala with Ambepussa Link) ...... 25
2.2.5. Scenario 3: Section123 (Kadawatha to Kurunegala with Pothuhara- Galagedera and Ambepussa Link) ...... 27
2.2.6. Scenario 4: Section124 (Kadawatha to Dambulla with Ambepussa Link) ...... 29
2.2.7. Scenario 5: Section1234 (Complete CE Trace)...... 32
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3. Economic Analysis ...... 35
3.1. Economic evaluation assumptions and parameters ...... 35
3.1.1. Analysis period ...... 35
3.1.2. Traffic Modelling Results ...... 35
3.1.3. Discount rate ...... 42
3.2. Estimation of Economic value of Project cost ...... 42
3.2.1. Construction cost estimation ...... 42
3.2.2. Operating and maintenance cost estimation ...... 43
3.2.3. Economic value of cost ...... 43
3.3. Estimation of Economic value of Benefits ...... 44
3.4. Cost Benefit Analysis...... 47
3.4.1. Present value of cost ...... 47
3.4.2. Present value of Benefits ...... 47
3.4.3. Economic indicators ...... 48
3.5. Alternative Analysis ...... 48
3.5.1. Economic analysis of Alternative Scenarios ...... 49
4. Risk Assessment ...... 50
4.1. Sensitivity analysis ...... 50
4.1.1. Sensitivity analysis for discount rate ...... 56
4.2. Toll Revenue Forecast ...... 58
5. Conclusion ...... 59
APPENDIX 1 ...... i
APPENDIX 2 ...... ii
APPENDIX 3 ...... iii
APPENDIX 4 ...... v
APPENDIX 5 ...... ix
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List of Tables Table 1. Interchange Locations ...... 2 Table 2. Sri Lanka GDP 2002-2014 (Rs, mn)...... 6 Table 3. Sri Lanka Road Network ...... 7 Table 4: NESTM Network Parameters ...... 13 Table 5: Future Year National Road Road Expansions ...... 13 Table 6: Expressway Connectivity roads in Kandy Area ...... 15 Table 7: User classes assigned to the network ...... 17 Table 8: Network Routing Parameters (2012 Rs Values) ...... 18 Table 9: Current Tolling Stratergy by RDA ...... 19 Table 10: Trip growth rates in NEP Estimations ...... 20 Table 11: Vehicle trips by Forecasted Year with CAGR ...... 22 Table 12: Alternatives scenarios and sections considered ...... 22 Table 13: Central Expressway Vehicle Volumes Between IC by Year for Scenario 1 ...... 23 Table 14: Central Expressway Vehicle Volumes Between IC by Year for Scenario 2 ...... 25 Table 15: Central Expressway Vehicle Volumes Between IC by Year for Scenario 3 ...... 27 Table 16: Central Expressway Vehicle Volumes Between IC by Year for Scenario 4 ...... 30 Table 17: Central Expressway Vehcile Volumes Between IC by Year for Scenario 5 ...... 32 Table 18. Base case ‘Do Minimum’ Traffic Modelling Results ...... 36 Table 19. Traffic Modelling Results: Scenario 1 ...... 37 Table 20. Traffic Modelling Results: Scenario 2 ...... 38 Table 21. Traffic Modelling Results: Scenario 3 ...... 39 Table 22. Traffic Modelling Results: Scenario 4 ...... 40 Table 23. Traffic Modelling Results: Scenario 5 ...... 41 Table 24. Summary of Construction Cost for the Expressway Project ...... 42 Table 25. Travel Time Savings from the Expressway (Scenario 5) ...... 44 Table 26. Value of Time for Vehicle Types ...... 45 Table 27. Vehicle Operating Costs for Vehicle Types ...... 45 Table 28: Alternatives and sections considered for Stage wise development ...... 49 Table 29. Economic analysis for alternative scenarios ...... 49 Table 30. Sensitivity analysis for Scenario 5 (Entire Expressway) ...... 51
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Table 31. Sensitivity analysis for Scenario 1 (Section 1) ...... 52 Table 32. Sensitivity analysis for Scenario 2 (Section 1,2) ...... 53 Table 33. Sensitivity analysis for Scenario 3 (Section 1,2,3) ...... 54 Table 34. Sensitivity analysis for Scenario 1 (Section 1,2,4) ...... 55 Table 35. Toll Revenue from the Expressway ...... 58 Table 36. Estimated Toll Revenue for Alternative Scenarios (Rs. Bn per annum) ...... 58 Table 37. Economic Analysis for Alternative Scenarios ...... 59 Table 38. Ranking of Alternatives ...... 59
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List of Figures Figure 1. CKAH Alignment ...... 3 Figure 2. Alternative Traces for Kandy Link from Northern Expressway and Ambepussa Link .. 4 Figure 3 Central Expressway Final Alignment ...... 5 Figure 4: NESTM Coverage Area with Transport Analysis Zones - DSD by Districts ...... 9 Figure 5: NESTM Model Lane Numbers and 2012 Base Year Network ...... 11 Figure 6: NESTM Model Free Flow Speeds for 2012 Base Year Network ...... 12 Figure 7 Future Year Network with CE Trace...... 16 Figure 8: Form of the BPR Function ...... 18 Figure 9: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 1 ...... 23 Figure 10: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 1 .... 24 Figure 11: Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 1 .... 24 Figure 12: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 2 .... 25 Figure 13: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 2 .... 26 Figure 14: Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 2 .... 26 Figure 15: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 3 .... 28 Figure 16: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 3 .... 28 Figure 17: Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 3 .... 29 Figure 18: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 4 .... 30 Figure 19: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 4 .... 31 Figure 20: Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 4 .... 31 Figure 21: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 5 .... 33 Figure 22: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 5 .... 33 Figure 23 Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 5 .... 34 Figure 24. Vehicle-km in the Network for Project/Base Case ...... 46 Figure 25. Sensitivity analysis for discount rate ...... 57
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1. PROJECT DESCRIPTION
1.1. EXPRESSWAY NETWORK IN SRI LANKA
The expressway network in Sri Lanka comprise of three expressways that are in operation and two expressways in the planning or construction stage. The Southern Expressway (E1) is the first expressway constructed in Sri Lanka with phase one constructed from Kottawa to Pinnaduwa and phase two from Pinnaduwa to Godagama (Matara). Total length of the expressway is 128 km. The extension of the Southern Expressway up to Hambantota is under construction. The Outer Circular Highway (E2) connects to E1 at Kottawa and extends up to Kerawalapitiya, a total distance of 29.2km via Kaduwela and Kadawatha, the section from Kadawatha to Kerawalapitiya is under construction. The Colombo-Katunayaka Expressway (E3) is constructed from new Kelani bridge to Katunayake, a distance of 25.8 km. In addition to the above, Ruwanpura Expressway has been planned from Kahathuduwa (on E1) to Pelmadulla and the Central Expressway from Kadawatha to Dambulla.
1.2. INTRODUCTION
The objective of the current study is to evaluate the economic feasibility of the proposed Central Expressway. The starting point in Colombo is at Kadawatha interchange with the Outer Circular Highway -III (OCH -III).The expressway will extend up to Dambulla. Additional link will be constructed to Galagedara (starting from Potuhera IC). In addition, there will be a highway constructed connecting the expressway to Ambepussa starting from Mirigama IC. Interchange locations are given Table 1.
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Table 1. Interchange Locations Interchange Chainage Kadawatha 0+000 Gampaha 11+354 Veyangoda 21+985 Mirigama South 33+560 Mirigama North (System) 37+980 Nakalagamuwa 55+140 Potuhera (System) 63+000 Dambokka 70+289 Kurunegala 75+880 Ridigama 89+310 Melsiripura 108+210 Galweala 124+410 Dambulla 136+960 Ambepussa Link Mirigama - North 0+000 Ambepussa 9+160 Galagedara Link Potuhera 0+000 Polgahawela 4+650 Rambukkana 13+850 Galagedara 32+480
1.3. EXPRESSWAY ALIGNMENT SELECTION
The expressway trace selection was finalized based on the following study reports available for the same corridor. 1. Colombo - Kandy Alternative Highway Feasibility Study - December 2001, Resource Development Consultants Pvt. Ltd. 2. Northern Expressway Feasibility Study - November 2013, SMEC International Pvt. Ltd. 3. Northern Expressway Project Report - February 2015, Road Development Authority.
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1.3.1. Trace from Kadawatha to Gampaha
The Colombo-Kandy Alternative Highway (CKAH) Feasibility Study finalized trace starting from Kadawatha to Kandy. The complete trace of the CKAH identified in the study is given in APPENDIX 1. The section from Kadawatha from Gampaha is given Figure 1. Based on the evaluation of the study, the trace from Kadawatha to Gampaha via Ganemulla is chosen as the final trace for CKAH.
Source: Colombo - Kandy Alternative Highway Feasibility Study, December 2001 Figure 1. CKAH Alignment
1.3.2. Trace from Gampaha to Dambulla
The alignments considered in the Northern Expressway Feasibility Study are given in APPENDIX 2. Four alternative alignments were considered for the Kandy link as shown in Figure 2, together with an standard highway to Ambepussa. All the alternative routes were economically viable options based on the feasibility report findings.
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Source: Northern Expressway Feasibility Study, November 2013 Figure 2. Alternative Traces for Kandy Link from Northern Expressway and Ambepussa Link
1.3.3. Proposed trace for Central Expressway
Based on the findings of the previous studies on CKAH and NEP, the Central Expressway trace was finalized as given in Figure 3 . The scope of the current study was outlined by Road Development Authority to use the Stage 3C trace of the Kandy Link (of the Northern Expressway Feasibility Study) that connects the Central Expressway at Potuhera through a system interchange and travel via Polgahawela, Rambukkana to Galagedera. Further the connection to the Outer Circular Highway (OCH) was changed from Enderamulla (considered in the previous study) to Kadawatha.
New interchanges at Mirigama North, Rideegama, Galewala, Polgahawela were also considered under the study.
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Dambulla IC
Potuhera IC
Kandy Link
Mirigama North IC
Kadawatha IC
Figure 3 Central Expressway Final Alignment
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1.4. ECONOMY AND TRANSPORT SECTOR OVERVIEW
The overall economic situation in Sri Lanka that will determine its economic and social developments will be the main influential factor for the traffic demand on the new expressway. Sri Lanka’s economic performance has been relatively strong since 2009. GDP for Sri Lanka in 2014 was estimated at Rs 9784.6 billion in current prices. Over the period since 2002, Sri Lanka’s GDP grew at an annual average rate of 7.5 per cent in real terms (see Table 2). By world standards Sri Lanka is considered a fast growing economy and now has reached lower middle income level category having GDP per capita of US $3460 in 20141.
Table 2. Sri Lanka GDP 2002-2014 (Rs, mn)2 Year GDP (Rs. Mn. Nominal GDP(Rs. Mn. at Growth GDP at current Growth rate constant rate % deflator prices) % prices)base year 2002 2002 1,636,037 - 1,636,037 - 100.0 2010 5,604,104 15.9 2,645,542 8.0 211.8 2011 6,543,313 16.8 2,863,691 8.2 228.5 2012 7,578,554 15.8 3,045,288 6.3 248.9 2013(d) 8,674,230 14.5 3,266,041 7.2 265.6 2014(e) 9,784,672 12.8 3,506,664 7.4 279.0
Key sectors of the Sri Lanka’s economy are; agriculture & fishing, industry and services. As of 2014, agriculture and fishing contributes 11.86% of GDP; industry contributes 33.81% while services contribute almost 56.33%.
The Government of Sri Lanka (GOSL) has continued to invest in large scale infrastructure projects such as Expressways over the past decade, in an attempt to foster development is areas that has seen very limited economic growth over the years. Poor infrastructure and limited accessibility and mobility have restricted industries from expanding in such areas, and
1 World Bank, http://data.worldbank.org/country/sri-lanka 2 Central Bank of Sri Lanka (2015)”Economic and Social Statistics of Sri Lanka 2015 table 4.2 ,pg.28, Note: (d)revised ,(e) estimate
6 the development has largely been confined to the Western Province of the country. This is evident from the fact that Western Province accounts for nearly 40% of GDP of the country. However, there is great potential in the Northern and Central parts of the country for economic growth, if the required infrastructure facilities are available.
Therefore, GOSL has invested heavily on transport infrastructure by improving the conditions and capacity of the existing road network and developing an expressway network to cover all the regional centres of the country.
The total road stock has increased by over 6,000 kilometres since 2000 as shown in Table 3. The majority of new roads have been in the rural environment to improve accessibility to small communities. Table 3. Sri Lanka Road Network3 Year Class A Class B Class C Class D Expressways Total 2000 4,222 7,265 7,315 5,425 - 24,227 2005 4,314 7,706 8,257 6,074 - 26,351 2014 4,215 7,993 11,837 7,193 161 31,398
‘A’ Class – All roads within the network of Trunk Roads connecting the national capital with the provincial capitals and also connecting these capitals with one another ‘B’ Class – Main roads connecting other important towns and also providing important links within the trunk route system ‘C’ Class – Other roads such as agricultural roads and local roads ‘D’ Class – Gravelled road generally motorable during dry weather only ‘E’ Class – Briddle paths, generally not for motor vehicles but some are for 4WD E1’Class – Expressways (Southern Expressway).
3 Central Bank of Sri Lanka (2015) “Economic and Social Statistics of Sri Lanka 2015” Table 12.1, pg.122 7
2. TRAFFIC DEMAND ANALYSIS
2.1. TRAFFIC FORECASTING MODEL
The traffic demand analysis for the Central Expressway Project, (CEP) was conducted using the Northern Expressway Strategic Traffic Model (NESTM) that was developed by M/S SMEC International (Pvt) Ltd, Australia as part of the Northern Expressway Project Feasibility Study. The above study is named as NEP hereafter in the report. The NESTM is a project specific traffic model developed using the Cube Voyager Software, which provides forecasted traffic volumes in terms of average weekday daily traffic (AWDT) for private cars travel for business and private purposes and commercial vehicles under three categories along expressway and along A and B class road within the study area. A range of other model outputs including Vehicle Kilometres Travelled (VKT) and Vehicle Hours Travelled (VHT) are generated that has enabled the economic analysis to be completed. The NEP has conducted an extensive study of the project by collecting base year data for 2012 and developing the NESTM which has been calibrated and validated. The information in this report is predominantly taken from the NEP study and extracted from Economic and Financial Report on the Northern Expressway Affordability and Delivery Models, Appendix A – Traffic and Tolling Analysis Report, unless otherwise stated. The modelling work in the current exercise was done using the NESTM developed by M/S SMEC with necessary network and parameter modification specified in this report. The Model development process and the calibration process adopted are explained in the report by M/S SMEC and is extracted and included in a separated annex (Annex 1) to this report.
2.1.1. Study Area The study area for the NESTM was based around achieving a balance between using too small a study area where there is a danger that not all of the relevant data will be captured against using too large an area which can result in wasted time collecting data that is not relevant.
The study area used here defines the extent of the detailed assessment and collection of data on transport infrastructure, travel patterns and demographic data. It is based on 8 incorporating an area where existing and likely future travel patterns will influence and be influenced by the development of the expressway. Therefore, key destinations such as Colombo metropolitan urban area, Gampaha, Kandy, Kurunegala, Trincomalee and Anuradhapura are included along with major roads such as the A1, A6, A9 and A10.
Figure 4: NESTM Coverage Area with Transport Analysis Zones - DSD by Districts
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Integral to identifying the study area is the need to establish a traffic analysis zone (TAZ) system. A zone is a spatial area from which demographic and land use data is represented. The zone acts a generator of trips (origin) and a place where trips of attracted to (destination).
The study area boundary and traffic zoning system within the study area needed to reflect an administrative boundary which defines a data source. There are four levels of government administration that data is generally reported upon, Provincial (9), District (25), Divisional Secretary's Divisions(DSD) and Grama Niladharis (GN). The DSD has been identified as being the most appropriate in terms of size and availability of data and was used as the basis for the traffic zones within the study area.
NESTM includes 187 internal and 29 external traffic analysis zones (TAZ) in the study area. The coverage and zone system of the traffic model are shown in Figure 4. The TAZ and the DSD equivalent table is shown in APPENDIX 4. It should be noted that some of the DSDs have been divided to form multiple TAZ so that better geographical representation is made. The TAZs adopted by NEP was considered sufficient and adopted in the current study.
2.1.2. Base Year Network
The 2012 Base year network was refined to include detailed representation of the road network which include the link type, speeds, capacities based on the road classes, number of lanes, districts and observed travel speeds. The model network and associated network parameters are shown in Figure 5, Figure 6 and Table 4. The development of the base year 2012 network is covered in detail in Section 5 of the Annex 1.
2.1.3. Future Year Network
NESTM future year national road expansions were based on Road Development Authority (RDA) National Road Master Plan 2007 – 2017. The key projects that is included in the NESTM model in NEP is tabulated in Table 5 with the year of commission.
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Source: SMEC Figure 5: NESTM Model Lane Numbers and 2012 Base Year Network
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Source: SMEC Figure 6: NESTM Model Free Flow Speeds for 2012 Base Year Network
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Table 4: NESTM Network Parameters
Source: SMEC Table 5: Future Year National Road Road Expansions
Source: SMEC
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The future year network of the Central expressway was considered in from 2016 in the NEP. However considering the current situation the Central Expressway scenarios has been considered from years 2021 onwards and the model results have been considered for 2021, 2026 and 2036.
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The trace for the Central Expressway shown in Figure 3 and Figure 4 was considered as the option Stage 3C under the NEP report. The trace considered in the current study has following changes made to the network. The CEP connects to the Outer Circular Highway (OCH) at Kadawatha instead of Enderamulla. The Kandy Link connects the Central Expressway at Potuhera through a system interchange travel via Polgahawela, Rambukkana to Galagedera. New interchange at Polgahawela and Rambukkana on the Kandy Link. New Interchanges at Mirigama North, Rideegama and Galewala. The Ambepussa link connects to the CE at Mirigama North Interchange is a standard 2 lane highway instead of an expressway link. The local road widening & improvement in kandy area as identified by the RDA as shown in Table 6 . Table 6: Expressway Connectivity roads in Kandy Area
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The port access elevated road has been extended up to Galle face as per the updated plan. The OCH connection at Kerawalapitiya with access to A3 road via Gunasekara Mawatha. New Interchanges at Athurugiriya, Kadawatha and kothalawalapura has been included to the OCH.
Figure 7 Future Year Network with CE Trace
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2.1.4. Assignment
Trip assignment method used here is equilibrium assignment with the generalized cost function as follows.
A 24 hour multi class assignment model, where the vehicle demands are segmented and different choice parameters are applied to the each class was adopted. The vehicle class segments in Table 7 are used in the model.
Table 7: User classes assigned to the network
The Vehicle operating cost (VOC) and Value of Time (VOT) that was used in the NESTM in NEP was considered as need of a revision and therefore was updated in the current study. The updated VOC and VOT in Table 8 were based on the values given in the report, Assessing Public Investment in the Transport Sector, 2000, Department of National Planning. The VOT is estimated considering the intercity travel scenario while the VOC is estimated assuming IRR of 6 and speed of 30km/h.
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Table 8: Network Routing Parameters (2012 Rs Values)
The delay function is used to calculate the congested travel time on each link of the road network in equilibrium assignment. The standard Bureau of Public Roads (BPR) formula was used in the traffic model:
The NESTM uses a coefficient of 2 and exponential of 4. The form of the function for a free flow speed of 30 km/h is shown in Figure 8.
Figure 8: Form of the BPR Function
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2.1.5. Central Expressway Toll Strategy
The NEP considered a range of toll strategies and recommended a distance based slab toll system that was not consistent with the current tolling strategy used by the RDA. A regression analysis was done to estimate the toll based on a fixed cost component and variable cost component based on the distance between interchange using the current tolling rates of RDA on Southern Expressway and OCH. The findings are shown in Table 9. This reflects that there is a fixed cost component each time a vehicle enters through an interchange and the variable cost accounts for the distance travelled on the expressway. The fix cost component is not accounted when a vehicle pass through a system interchange such as Kadawatha System Interchange.
Table 9: Current Tolling Stratergy by RDA
The IC to IC tolls for CE was derived from the above equation based on the distance between ICs. The discounted rate was considered with only distance based variable cost been applied when travel originating from a IC from either Southern expressway or OCH (including at the Kadawatha SI), since a fixed cost is already applied at the entry to either SE or OCH.
2.2. FORECASTED TRAFFIC ON THE CENTRAL EXPRESSWAY
The NEP by SMEC evaluated 5 scenarios: 1. Conservative 2. Improved Connections 3. Mid‐way 4. GDP linked CV growth – toll on NE 4A GDP linked CV growth – No toll on NE 5. Ultimate Development 19
The Conservative scenario represents a situation where current travel behaviour and economic activity does not significantly change. Improved Connection reports on the benefits that improved access onto the NE, in particular a direct connection to the Kelani bridge area and in to the port. Mid‐Way introduces the effects of changes to travel behaviour that occur through increases in Value of Time where the needs of a road user in reaching a destination quicker is perceived to be higher and as such they are willing to pay a toll to achieve this time saving. GDP linked CV growth – toll identifies further changes in travel behaviour and economic activity with a higher a growth in the number of commercial vehicles as it is linked to a projected annual national GDP rather than the lower growth value of employment. The 4A no‐toll subset provides a sensitivity test on the effect of a no toll expressway. The Ultimate Development scenario represents a future year case where travel behaviour and economic activity have significantly altered due to much increased economic activity across all variables and a low toll rate on the NE
The GDP linked CV growth scenario was selected by the NEP as the most suitable scenario to evaluate the feasibility. The growth rates estimated in the NEP by SMEC is shown in Table 10.
Table 10: Trip growth rates in NEP Estimations
While noting that this scenario resembles the most probable scenario, a revision was warranted based on two reasons and following changes were made. 1. The growth rate of 1.40% - 1.47% per annum for Private vehicle was underestimating the growth of private vehicles. The motor car registration growth in Sri Lanka is around 6.65% for cars and even higher for motor cycles at 9.55% and three wheelers
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at 15% from years 2011- 2014. Therefore the GDP based growth factor for private vehicles were updated to be 5% based on annual growth values on existing road network as shown in Table 10. 2. CV growth factor of 5.21% across all CV types was considered too high. The highest annual growth in the national highway network is around 4% for LCV while MCV and HCV are 3.5% and 2.5% respectively. Therefore the GDP based CV growth rates were adjusted for commercial vehicles as shown in Table 10.
2.2.1. Base Case
The base case is defined as the ‘do minimum’ scenario where the expressway is not built, but the identified future year national road network improvements under Table 5 is completed. The model runs were completed for ‘do minimum’ scenarios for year 2021, 2026 and 2036.
2.2.2. Project Case
The project case selected for further analysis is similar to GDP linked CV growth as selected in NEP, but with adjusted future year growth rates for private vehicles and commercial vehicles and updated network parameters discussed previously. The growth rates for future year forecasts are based on Compound Annual Growth Rate (CAGR) as shown in Table 11. The CAGR is higher in earlier years and then reduces towards 2036 as shown in parenthesis. The total vehicle trips based on the selected scenario with updated growth values were assigned to the network for the years 2021, 2026 and 2036 for future forecast.
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Table 11: Vehicle trips by Forecasted Year with CAGR
The stage wise analysis was conducted to estimate the volumes on expressway and the VHT, VKT required for economic analysis to be considered for stage wise development of the expressway based on the following sections.
Section 1: Kadawatha to Mirigama (North) Section 2: Mirigama (North) to Kurunegala with Ambepussa Link Section 3: Pothuhara – Galagedera Section 4: Kurunegala - Dambulla
Five scenarios were considered for stage wise analysis with combination of different sections detailed in Table 12. Table 12: Alternatives scenarios and sections considered Scenario Section Abbreviation Sections Included Scenario 1 Section1 1 Scenario 2 Section12 1,2 Scenario 3 Section123 1,2,3 Scenario 4 Section124 1,2,4 Scenario 5 Section1234 (complete trace) 1,2,3,4
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2.2.3. Scenario 1: Section1 (Kadawatha to Mirigama)
The forecasted vehicle volumes on the Central Expressway between interchanges for scenario 1 with only section 1 are shown in Table 17. These are illustrated for forecasted years 2021, 2026 and 2036 in Figure 21, Figure 22 and Figure 23. The link by link daily vehicle volumes by each forecasted year is included in the APPENDIX 5
Table 13: Central Expressway Vehicle Volumes Between IC by Year for Scenario 1 (Veh/day)
Figure 9: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 1
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Figure 10: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 1
Figure 11: Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 1
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2.2.4. Scenario 2: Section12 (Kadawatha to Kurunegala with Ambepussa Link) The forecasted vehicle volumes on the Central Expressway between interchanges for scenario 2 with sections 1 and 2 are shown in Table 14. These are illustrated for forecasted years 2021, 2026 and 2036 in Figure 12, Figure 13 and Figure 14. The link by link daily vehicle volumes by each forecasted year is included in the APPENDIX 5.
Table 14: Central Expressway Vehicle Volumes Between IC by Year for Scenario 2 (Veh/day)
Figure 12: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 2 25
Figure 13: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 2
Figure 14: Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 2
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2.2.5. Scenario 3: Section123 (Kadawatha to Kurunegala with Pothuhara- Galagedera and Ambepussa Link)
The forecasted vehicle volumes on the Central Expressway between interchanges for scenario 3 with sections 1, 2 and 3 are shown in Table 15. These are illustrated for forecasted years 2021, 2026 and 2036 in Figure 15, Figure 16 and Figure 17. The link by link daily vehicle volumes by each forecasted year is included in the APPENDIX 5.
Table 15: Central Expressway Vehicle Volumes Between IC by Year for Scenario 3 (Veh/day)
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Figure 15: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 3
Figure 16: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 3
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Figure 17: Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 3
2.2.6. Scenario 4: Section124 (Kadawatha to Dambulla with Ambepussa Link)
The forecasted vehicle volumes on the Central Expressway between interchanges for scenario 4 with sections 1, 2 and 4 are shown in Table 16. These are illustrated for forecasted years 2021, 2026 and 2036 in Figure 18, Figure 19 and Figure 20. The link by link daily vehicle volumes by each forecasted year is included in the APPENDIX 5.
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Table 16: Central Expressway Vehicle Volumes Between IC by Year for Scenario 4(Veh/day)
Figure 18: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 4
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Figure 19: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 4
Figure 20: Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 4
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2.2.7. Scenario 5: Section1234 (Complete CE Trace)
The forecasted vehicle volumes on the Central Expressway between interchanges are shown in Table 17. These are illustrated for forecasted years 2021, 2026 and 2036 in Figure 21, Figure 22 and Figure 23. The link by link daily vehicle volumes by each forecasted year is included in the APPENDIX 5.
Table 17: Central Expressway Vehcile Volumes Between IC by Year (Veh/day) for Scenario 5
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Figure 21: Daily Vehicle Volumes between IC on Central Expressway -2021 for Scenario 5
Figure 22: Daily Vehicle Volumes between IC on Central Expressway -2026 for Scenario 5
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Figure 23 Daily Vehicle Volumes between IC on Central Expressway -2036 for Scenario 5
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3. ECONOMIC ANALYSIS
3.1. ECONOMIC EVALUATION ASSUMPTIONS AND PARAMETERS
3.1.1. Analysis period
The analysis period of the economic analysis is 30 years; this includes a construction period of from 2016 to 2020 and an operation period from 2020 to 2046. The traffic demand forecast is done for 20 years from 2016-2036. The remaining 10 years will be accounted through extrapolation. The traffic forecast was limited to 2036, mainly due to the lack of accurate socio economic data and a trip generation model based on socio-economic parameters, future development information. Estimating traffic demand for extensive periods in the future may not have high accuracy under this scenario; therefore the demand estimation was only done for 20 year period.
3.1.2. Traffic Modelling Results
The CE Traffic model is used to generate outputs for use in economic analysis. The model outputs include a daily estimate of the following measures for both base case and project case. Vehicle (Car and commercial vehicle ) trips per day Vehicle Kilometre Travelled (VKT) Vehicle Hour Travelled (VHT) per day.
The results of the traffic modelling for the base case are shown in Table 18 and for project scenarios are shown in Table 19 through to Table 23.
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Table 18. Base case ‘Do Minimum’ Traffic Modelling Results
Note: PV_NB - Private vehicle (Non-business), PV_B - Private vehicle (Business), LCV - Light commercial vehicle, MCV - Medium commercial vehicle, HCV - Heavy commercial vehicle.
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Table 19. Traffic Modelling Results: Scenario 1
Note: PV_NB - Private vehicle (Non-business), PV_B - Private vehicle (Business), LCV - Light commercial vehicle, MCV - Medium commercial vehicle, HCV - Heavy commercial vehicle.
37
Table 20. Traffic Modelling Results: Scenario 2
Note: PV_NB - Private vehicle (Non-business), PV_B - Private vehicle (Business), LCV - Light commercial vehicle, MCV - Medium commercial vehicle, HCV - Heavy commercial vehicle.
38
Table 21. Traffic Modelling Results: Scenario 3
Note: PV_NB - Private vehicle (Non-business), PV_B - Private vehicle (Business), LCV - Light commercial vehicle, MCV - Medium commercial vehicle, HCV - Heavy commercial vehicle.
39
Table 22. Traffic Modelling Results: Scenario 4
Note: PV_NB - Private vehicle (Non-business), PV_B - Private vehicle (Business), LCV - Light commercial vehicle, MCV - Medium commercial vehicle, HCV - Heavy commercial vehicle.
40
Table 23. Traffic Modelling Results: Scenario 5
Note: PV_NB - Private vehicle (Non-business), PV_B - Private vehicle (Business), LCV - Light commercial vehicle, MCV - Medium commercial vehicle, HCV - Heavy commercial vehicle. 41
3.1.3. Discount rate
The discount rate recommended for transport project feasibility studies by ADB is 10% -12%4. However to account for inflation the discount rate needs to be adjusted to calculate the real discount rate which is used for the economic analysis. The five year average inflation is estimated as 5%, assuming a discount rate of 12%, the real discount rate would be 6.7%. For the purpose of the study, a discount rate of 7% is used. Similar rate was adopted in the Northern Expressway Feasibility Study Report5.
3.2. ESTIMATION OF ECONOMIC VALUE OF PROJECT COST
3.2.1. Construction cost estimation
The total project cost is Rs. 476.47 Billion (without VAT) and a summary of the construction cost of the expressway6 is given in Table 24. The land acquisition cost is estimated as Rs. 54 Billion.7
Table 24. Summary of Construction Cost for the Expressway Project Section Length (km) Cost Rs. Bn Section 1 Kadawatha -Mirigama 36.54 158.38 Section 2 Mirigama - Potuhera - Kurunegala 39.72 86.68 Ambeypussa link 9.30 Section 3 Potuhera-Galagedara 32.50 95.33 Section 4 Kurunegala - Dambulla 60.15 136.08
4 Guidelines for The Economic Analysis of Projects, 1997, ADB 5 Economic Evaluation of the Northern Expressway Project - Final Report, August 2013, SMEC International 6 Source: Data from the Road Development Authority, Central Expressway Project office 7 Source: Data from the Road Development Authority, Central Expressway Project office 42
3.2.2. Operating and maintenance cost estimation
Operating and maintenance cost include routine and periodic maintenance of the road, road furniture repairs, tolling station operation costs, expressway management centre operational costs; culverts, bridges and drainage maintenance costs, road lighting, CCTV operations etc.
The annual operating and maintenance cost is computed in the Northern Expressway Feasibility study report8 and is estimated at US $ 0.34 mn/km (2013 US $). In an ADB study report9 it is estimated at US $ 0.19 mn/km. However for this study the annual operating and maintenance costs were estimated considering the cost incurred for the Southern Expressway. The cost of routine maintenance and operating cost for the Central Expressway is estimated as Rs. 2.78 Bn per year (US $ 0.11 mn/km, at US $ 1 = Rs 143).
In addition to the annual operating and maintenance cost there is periodic costs as well such as overlays, replacement of equipment, vehicles etc. The cost estimate for periodic cost in the Northern Expressway is US $ 1.92 mn/km occurring every 10 years. For the purpose of this study periodic costs is estimated as Rs. 22.8 bn (US $ 0.89 mn/km, at US $ 1 = Rs 143) incurring every 10 years. This includes rehabilitation cost, upgrading of equipment and vehicles.
3.2.3. Economic value of cost
For the economic analysis the financial cost should be converted to represent the economic cost. The shadow price factor of 0.844 used in Northern Expressway Feasibility Study Report10 is used for converting construction financial cost to economic cost, and 0.83 is used to convert financial cost of operating and maintenance cost to its economic value.
8 Northern Expressway Feasibility study report - Appendix B, Project Costings, August 2013, SMEC International 9 Sri Lanka: Southern Transport Development Project, Completion Report, 2014, ADB 10 ibid 43
3.3. ESTIMATION OF ECONOMIC VALUE OF BENEFITS
The main benefits used in the economic analysis are 1. Travel time savings 2. Vehicle operating cost reduction 3. Accident reduction There are additional benefits such as emission reduction, regional economic growth, reduction of deterioration of highway network due to diversion of heavy vehicles to the expressway etc. In the absence of the satisfactory studies to estimate reliable economic parameters and estimation methods for Sri Lanka, these benefits are not quantified in the economic analysis of the study.
Based on the traffic modelling results, due to the expressway construction the total vehicle hours travelled on the network in the project impact area reduce by 3%, 4% and 13% for the years 2021, 2026 and 2036 respectively. Since the total traffic volume is expected to increase during the period, a reduction of vehicle hours indicate less congestion and increased travel speed on the network, therefore there is significant benefits can be expected due to travel time savings. Table 25. Travel Time Savings from the Expressway (Scenario 5)
2021 2026 2036 Type Base Project Base Project Base Project
PV NB 529,254 511,943 859,585 824,567 4,006,841 3,508,220
PV B 72,979 70,072 122,327 115,971 557,533 484,390
LCV 39,774 38,222 54,668 51,819 167,842 144,181
MCV 181,412 176,027 243,675 233,483 719,816 618,227
HCV 11,252 10,845 15,369 14,557 48,376 41,076
Total Ve-hr in network 834,671 807,109 1,295,623 1,240,397 5,500,408 4,796,094 Reduction in vehicle hours in the impact area 3% 4% 13%
The travel time savings are quantified based on the value of time (VOT) estimates for each vehicle category, the value of time used in the analysis for different vehicle types is given in Table 26.
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Table 26. Value of Time for Vehicle Types Type VOT (Rs./hr) Private vehicle Non Business 407 Private vehicle Business 597 Light commercial vehicle 517 Medium commercial vehicle 850 Heavy commercial vehicle 1,250
The vehicle operating costs (VOC) used in the analysis for different vehicle types is given in Table 27. Table 27. Vehicle Operating Costs for Vehicle Types Type VOC_Expressway (Rs./km) VOC_Highway Network (Rs./km) Private vehicle 25.9 28.8 Light commercial vehicle 25.9 28.8 Medium commercial vehicle 39.1 47.1 Heavy commercial vehicle 56.8 68.4
The Vehicle Operating Cost and Value of Time estimates are based on the values given in the report, Assessing Public Investment in the Transport Sector, 2000, Department of National Planning11. The VOT and VOC values given in the report in 1999 Rs. are adjusted to represent current prices. In the absence of VOC values for the different road classes considering the new vehicle types, roughness levels and deterioration rates, terrain etc., VOC values for the expressway which is used in the study are based on past studies. Vehicle operating cost for expressway is decreased from that for highways considering the savings on vehicle wear and tear, fuel consumption largely due to lower roughness value (IRI) of the expressway. Similar estimate was adopted in the Northern Expressway Economic Feasibility study report12.
11 Assessing Public Investment in the Transport Sector, 2000, Department of National Planning. 12 ibid 45
60,000,000
50,000,000
40,000,000
km
-
30,000,000 Vehicle 20,000,000
10,000,000
- 2020 2025 2030 2035 2040 Year Expressway Other network
Base (without project)
Figure 24. Vehicle-km in the Network for Project/Base Case
As evident from the Figure 24 the total vehicle-km in the highway network has decreased when comparing the base case (do nothing scenario) with the project case. Therefore this will reduce the deterioration of roads in the network as well as reduce the overall vehicle operating cost of the road users in the network.
The accident rates reduce on expressways compared to normal highway roads (A class). The fatal accident rate for highways is 0.12 accidents/ mn veh-km and for expressways is 0.05 accidents/mn veh-km13. The economic cost of a fatal accidents represent the majority of the total economic cost of accidents in Sri Lanka, furthermore there are no present estimates for accident rate for other types of accidents (damage only, grievous, non-grievous) for expressways in Sri Lanka, therefore consideration of reduction of fatal accidents is deemed adequate for the purpose of this analysis. The economic value of a fatal accident is given as Rs. 1.51 mn (1999 Rs.) in a report published by Department of National Planning, Sri Lanka14, the adjusted value to represent the current value is Rs. 5.75 mn, indexed based on CCPI.
13 Feasibility Study to Connect Padeniya to an Appropriate Location on the Expressway Network, 2012, University of Moratuwa 14 ibid. 46
3.4. COST BENEFIT ANALYSIS
The do nothing scenario will be the base case for the cost benefit analysis, the benefits will be derived based on the decrease in vehicle operating cost, travel time savings and accident reduction due to the implementation of the project.
3.4.1. Present value of cost
The net present value of the project cost is Rs. 449.67 Bn, this takes into account the distribution of cost during the construction period, the residual value and land acquisition cost. The present value of operating and maintenance cost is Rs. 33.65 Bn. A 25% residual value is included at the end of the analysis period, since it is expected that the expressway would continue to operate beyond the analysis period and its remaining useful value of the infrastructure is included in the residual value of the asset. A residual value of 30% is used after 25 year operating period for the Southern Expressway in the STDP Completion Report, ADB15.
The total discounted cost of the project is Rs. 483.32 Bn.
3.4.2. Present value of Benefits
The estimated present value of the benefits for the analysis period is as follows. Travel time savings - Rs. 610.08 Bn Vehicle operating cost savings - Rs. 65.69 Bn Accident reduction savings - Rs. 7.61Bn
The total discounted benefits from the project is Rs. 683.38 Bn
15 ibid 47
3.4.3. Economic indicators
The project’s economic feasibility will be based on the following parameters 1. Net present value of the project is Rs. 200.06 Bn 2. Internal rate of return is 9.0% 3. Benefit cost ratio of the project is 1.41
Based on the results of the economic analysis, the project is economically feasible. The economic analysis has only accounted for economic benefits that can be quantified accurately, with available parameters. As highlighted above, the project will yield additional benefits in terms of reduction in emissions, regional development which will increase the economic viability of the project. As wider economic impacts are typically not covered by conventional cost–benefit analysis, the scope of the benefits tends to be understated. Wider economic benefits in the case of the Central Expressway Project are merely captured by benefits accruing due to generated and diverted traffic, which serves as a proxy for all development benefits. Other wider economic benefits are created when a faster, more efficient transport facility provides better access to jobs and to higher productivity jobs, and enables synergies among clusters of enterprises, thereby increasing productivity. Major projects like the Central Expressway project enhance agglomeration economies by reducing transport costs.
3.5. ALTERNATIVE ANALYSIS
The alternative scenarios are created for the stage wise development with a combination of the different sections of the expressway as discussed in Section 2.2 of the report. Four alternative scenarios are analysed in addition to the economic analysis done for the entire expressway (Scenario 5) for which the results are given in Section 3.4.
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Table 28: Alternatives and sections considered for Stage wise development Scenario Stage Abbreviation Sections Included Scenario 1 Section1 Kadawatha to Mirigama (North) Scenario 2 Section12 Kadawatha to Kurunegala with Ambepussa Link Scenario 3 Section123 Kadawatha to Kurunegala with Ambepussa Link and Pothuhara – Galagedera Link Scenario 4 Section124 Kadawatha to Dambulla with Ambepussa Link Scenario 5 Section1234 Entire Expressway
3.5.1. Economic analysis of Alternative Scenarios
Analysis of alternative scenario as given in Table 29 depicts how the economic benefits are concentrated to the initial sections of the expressway. As expected the sections up to Mirigama/Kurunegala would attract the most traffic volume of the entire expressway, hence there is greater net benefit for the scenario analysed for stage wised development of the expressway up to those sections. Alternative Scenarios 3, 4 both include a section (Alternative 3- Potuhera-Galagedara, Alternative 4- Kurunegala-Dambulla) which incur a high construction cost with lower traffic demand, which results in negative marginal net economic benefit from extending the expressway to those sections. It is also important to note that Alternative 3 (Expressway up to Kurunegala with link to Galagedara) has more economic benefits compared Alternative 4 (Expressway up to Dambulla with no link to Galagedara). In effect, this would suggest that the initial segments of the expressway are subsidizing for the net economic loss of extending the expressway beyond Kurunegala. However, it must be noted that the analysis reflects a time period up to year 2036. With the anticipated regional developments in the study area, there will be more traffic volume on sections beyond Kurunegala which will improve its economic viability.
Table 29. Economic analysis for alternative scenarios
Alternative Scenarios 1 2 3 4 5 Net present value 437.45 376.82 318.84 246.06 200.06 B/C ratio 3.93 2.53 1.94 1.63 1.41 EIRR 14.91% 12.36% 10.82% 9.78% 9.00%
49
4. RISK ASSESSMENT
The variables considered in the economic analysis may change during the project implementation stage; therefore it is prudent to conduct a risk assessment to assess the sensitivity of project economic indicators to changes in these variables. The following significant parameters were considered for the sensitivity analysis. 1. Project cost -project cost can vary due to market prices that vary demand fluctuations, labour supply, material availability, variations in the project, construction delays etc. 2. Project benefit - the benefits will largely depend on the traffic demand forecasted for the expressway and this can vary due to several factors such as economic growth, developments in the region, population and employment, fuel prices, condition of the existing highways etc.
4.1. SENSITIVITY ANALYSIS
The sensitivity of the three economic parameters was evaluated based on the expected variation in project cost and project benefits.
The project cost has been varied from -20% to +30% representing 20% reduction in cost and 30% increase in cost respectively. This would represent the expected range of cost fluctuation during project implementation. Furthermore, the project benefits are also varied from -20%, representing a reduction of 20% to +30%, representing a 30% increase in benefits. The base case is given as zero, which will give the results obtained in Sections 3.4.3 and 3.5.1.
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Table 30. Sensitivity analysis for Scenario 5 (Entire Expressway)
Net Present Value Project Cost Benefits -20% -10% 0 +10% +20% +30% -20% 143 103 63 24 -16 -55 -10% 211 171 132 92 53 13 0 279 240 200 160 121 81 +10% 348 308 268 229 189 150 +20% 416 376 337 297 258 218 +30% 484 445 405 366 326 286 BC ratio Project Cost Benefits -20% -10% 0 +10% +20% +30% -20% 1.35 1.23 1.13 1.05 0.97 0.91 -10% 1.52 1.39 1.27 1.18 1.09 1.02 0 1.69 1.54 1.41 1.31 1.22 1.14 +10% 1.86 1.69 1.56 1.44 1.34 1.25 +20% 2.03 1.85 1.70 1.57 1.46 1.36 +30% 2.20 2.00 1.84 1.70 1.58 1.48 EIRR Project Cost Benefits -20% -10% 0 +10% +20% +30% -20% 8.7% 8.2% 7.7% 7.2% 6.8% 6.5% -10% 9.4% 8.9% 8.4% 7.9% 7.5% 7.1% 0 10.1% 9.5% 9.0% 8.5% 8.1% 7.7% +10% 10.7% 10.1% 9.5% 9.1% 8.6% 8.2% +20% 11.2% 10.6% 10.1% 9.6% 9.1% 8.7% +30% 11.7% 11.1% 10.6% 10.1% 9.6% 9.2%
As shown in Table 30, for the entire expressway (Scenario 5) the project yields positive results for the entire range of variables, except in two extreme cases where the economic value of benefits reduce by 20% at the same time the economic cost of construction has increased by 20% and 30%. Therefore it can be considered that the project economic viability is robust against fluctuations of the parameters used for the economic analysis.
51
Similar analysis was done for the four Alternative Scenarios 1-4, and is given Table 31-34.
Table 31. Sensitivity analysis for Scenario 1 (Section 1)
Net Present Value
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 346 333 320 307 294 281 -10% 405 392 379 366 352 339 0 464 451 437 424 411 398 +10% 522 509 496 483 470 457 +20% 581 568 555 542 529 515 +30% 640 627 614 600 587 574
BC ratio
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 3.81 3.44 3.14 2.89 2.67 2.49 -10% 4.29 3.88 3.53 3.25 3.01 2.80 0 4.77 4.31 3.93 3.61 3.34 3.11 +10% 5.24 4.74 4.32 3.97 3.67 3.42 +20% 5.72 5.17 4.71 4.33 4.01 3.73 +30% 6.20 5.60 5.11 4.69 4.34 4.04
EIRR
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 14.7% 14.1% 13.5% 13.0% 12.5% 12.1% -10% 15.5% 14.8% 14.2% 13.7% 13.2% 12.8% 0 16.2% 15.5% 14.9% 14.4% 13.9% 13.4% +10% 16.9% 16.2% 15.5% 15.0% 14.5% 14.0% +20% 17.4% 16.7% 16.1% 15.5% 15.0% 14.5% +30% 18.0% 17.3% 16.6% 16.1% 15.5% 15.1%
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Table 32. Sensitivity analysis for Scenario 2 (Section 1,2) Net Present Value
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 293 273 252 232 212 191 -10% 355 335 315 294 274 254 0 418 397 377 356 336 316 +10% 480 459 439 419 398 378 +20% 542 522 501 481 461 440 +30% 604 584 564 543 523 502
BC ratio
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 2.43 2.21 2.03 1.87 1.74 1.62 -10% 2.73 2.49 2.28 2.11 1.96 1.83 0 3.04 2.76 2.53 2.34 2.17 2.03 +10% 3.34 3.04 2.79 2.58 2.39 2.23 +20% 3.65 3.32 3.04 2.81 2.61 2.44 +30% 3.95 3.59 3.30 3.04 2.83 2.64
EIRR
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 12.1% 11.5% 11.0% 10.5% 10.1% 9.7% -10% 12.9% 12.3% 11.7% 11.2% 10.8% 10.4% 0 13.5% 12.9% 12.4% 11.9% 11.4% 11.0% +10% 14.2% 13.5% 13.0% 12.4% 12.0% 11.6% +20% 14.7% 14.1% 13.5% 13.0% 12.5% 12.1% +30% 15.3% 14.6% 14.0% 13.5% 13.0% 12.6%
Both Alternative Scenarios 1 and 2 perform well under all possible variations in the parameters considered; even in the worst case of 30% price escalation and 20% benefit reduction Alternative scenarios 1, 2 gives B/C ratio of 2.49 and 1.62 respectively. This gives strong indication of their economic viability and low risk of economic in feasibility during project implementation.
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Table 33. Sensitivity analysis for Scenario 3 (Section 1,2,3)
Net Present Value
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 243 215 187 159 131 103 -10% 309 281 253 225 197 169 0 375 347 319 291 263 234 +10% 441 413 385 357 328 300 +20% 507 479 450 422 394 366 +30% 572 544 516 488 460 432
BC ratio
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 1.86 1.69 1.55 1.43 1.33 1.24 -10% 2.09 1.90 1.75 1.61 1.50 1.40 0 2.33 2.12 1.94 1.79 1.66 1.55 +10% 2.56 2.33 2.13 1.97 1.83 1.71 +20% 2.79 2.54 2.33 2.15 2.00 1.86 +30% 3.02 2.75 2.52 2.33 2.16 2.02
EIRR
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 10.6% 10.0% 9.5% 9.0% 8.6% 8.2% -10% 11.3% 10.7% 10.2% 9.7% 9.3% 8.9% 0 12.0% 11.4% 10.8% 10.3% 9.9% 9.5% +10% 12.6% 12.0% 11.4% 10.9% 10.4% 10.0% +20% 13.1% 12.5% 11.9% 11.4% 11.0% 10.6% +30% 13.7% 13.0% 12.5% 11.9% 11.5% 11.0%
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Table 34. Sensitivity analysis for Scenario 1 (Section 1,2,4)
Net Present Value
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 183 151 119 88 56 24 -10% 246 214 183 151 119 88 0 309 278 246 214 183 151 +10% 373 341 310 278 246 215 +20% 436 405 373 341 310 278 +30% 500 468 436 405 373 341
BC ratio
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 1.56 1.42 1.31 1.21 1.12 1.05 -10% 1.76 1.60 1.47 1.36 1.26 1.18 0 1.95 1.78 1.63 1.51 1.40 1.31 +10% 2.15 1.96 1.80 1.66 1.55 1.44 +20% 2.34 2.13 1.96 1.81 1.69 1.58 +30% 2.54 2.31 2.12 1.96 1.83 1.71
EIRR
Project Cost Benefit -20% -10% 0 +10% +20% +30% -20% 9.5% 9.0% 8.5% 8.0% 7.6% 7.3% -10% 10.2% 9.7% 9.2% 8.7% 8.3% 7.9% 0 10.9% 10.3% 9.8% 9.3% 8.9% 8.5% +10% 11.5% 10.9% 10.3% 9.9% 9.4% 9.0% +20% 12.0% 11.4% 10.9% 10.4% 9.9% 9.5% +30% 12.5% 11.9% 11.4% 10.9% 10.4% 10.0%
Alternative Scenarios 3 and 4 also perform satisfactorily yielding positive results in all the variable range considered. However as with Scenario 5, the net benefit becomes marginal, when the cost increases beyond 25%.
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4.1.1. Sensitivity analysis for discount rate
The fluctuation of tax rates, interest rates etc. would affect the discount rate used in the study. Variation of the discount rate would result in a change in the net present value and benefit cost ratio derived from the economic analysis, which in turn would affect the assessment of the economic viability of the project. The variation of net present value with the discount rate is used to assess the risk of variation of discount rate would have on the outcome of the economic analysis. Figure 25 show the variation of NPV with discount rates for all alternatives analysed.
800
600
400
Billion) 200
0 Net Present(in Value Rs. 0% 2% 4% 6% 8% 10% 12% -200 Discount rate
Scenario 5 - Entire Expressway
1000
800
600
Billion) 400
200 Net Present(in Value Rs. 0 0% 2% 4% 6% 8% 10% 12% Discount rate
Scenario 1 - Section 1 only
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1000
800
600
Billion) 400
200 Net Present(in Value Rs. 0 0% 2% 4% 6% 8% 10% 12% Discount rate
Scenario 2 - Section 1,2 only
1000
800
600
400 Billion) 200
0 Net Present(in Value Rs. 0% 2% 4% 6% 8% 10% 12% -200 Discount rate
Scenario 3 - Section 1,2,3 only
900
700
500
Billion) 300
100 Net Present(in Value Rs. -100 0% 2% 4% 6% 8% 10% 12% Discount rate
Scenario 4 - Section 1,2,4 only Figure 25. Sensitivity analysis for discount rate From the analysis it is evident that the economic viability of the project is less sensitive to the discount rate used for Alternative Scenarios 1 and 2, whilst it is most sensitive for Scenario 5.
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4.2. TOLL REVENUE FORECAST
The traffic demand model output was used to estimate the toll revenue from the expressway (Scenario 5). Table 35. Toll Revenue from the Expressway Year Toll Revenue1 (Rs. Bn) Adjusted Toll Revenue2 (Rs. Bn) 2021 1.97 2.16 2026 2.79 3.38 2036 5.70 8.35
Note: 1. The toll rate for revenue calculation is in constant 2016 Rs., Increase in toll revenue is due to increase in traffic volume on the expressway 2. Toll revenue adjusted to reflect increase in toll rates, and increase of 10% every 5 years is assumed, toll revenue increase due to traffic volume increase and toll rate increase.
Table 36. Estimated Toll Revenue for Alternative Scenarios (Rs. Bn per annum) Year Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 2021 0.37 0.98 1.19 1.76 1.97 2026 0.61 1.43 1.74 2.48 2.79 2036 1.25 3.07 3.77 5.09 5.70 Note: Toll revenue ins 2016 Rs., assuming no change in toll rate.
The forecast shows the steady increase in toll revenue with the extension of the expressway.
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5. CONCLUSION
The economic feasibility evaluation of the proposed Central Expressway has analysed the economic benefits and cost of the expressway. Primary inputs for the demand estimates for the expressway were from the traffic modelling output. In addition to analysing the economic feasibility of the entire expressway trace, alternative scenarios were developed to assess their economic viability of stage-wise development of the expressway. The summary of the analysis is given in Table 37.
Table 37. Economic Analysis for Alternative Scenarios
Alternative Scenarios 1 2 3 4 5 Net present value 437.45 376.82 318.84 246.06 200.06 B/C ratio 3.93 2.53 1.94 1.63 1.41 EIRR 14.91% 12.36% 10.82% 9.78% 9.00%
Based on the analysis conducted Central Expressway Project is economically feasible, especially considering the unquantified benefits such as regional development that would result with the improved mobility to the Central, and Northern parts of the country. The alternative scenarios that were analysed can be ranked as follows based on their economic performance. Table 38. Ranking of Alternatives Rank Scenario Section Number 1 Scenario 1 Kadawatha to Mirigama (North) 2 Scenario 2 Kadawatha to Kurunegala with Ambepussa Link 3 Scenario 3 Kadawatha to Kurunegala with Ambepussa Link and Pothuhara – Galagedera Link 4 Scenario 4 Kadawatha to Dambulla with Ambepussa Link 5 Scenario 5 Entire Expressway
The initial sections of the expressways can be deemed to have high economically viability based on the economic analysis indicators such as B/C ratio and EIRR values, this is due to the
59 high volumes of vehicular traffic that is expected to divert to the expressway due to congested conditions of the existing road network. However, the net benefit reduces as the Expressway extends beyond the highly populous areas such as Kurunegala. This suggests, a) the high demand in the first two sections of the expressway will not be maintained throughout the expressway, and b) there needs to be development in the region (especially beyond Kurunegala) to create new vehicular demand so that the benefits from the expressway project can be maximized. Furthermore, it must be ensured that the cost of the expressway is managed during the implementation of the project within the range considered in the analysis so that the anticipated net benefits are realized from the project.
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APPENDIX 1 Colombo-Kandy Alternative Alignment
Source: Colombo - Kandy Alternative Highway Feasibility Study - December 2001.
i
APPENDIX 2 Northern Expressway Alignment
Source: Northern Expressway Feasibility Study - Economic and financial report on the northern expressway affordability and delivery models: Appendix E – Supplementary Report, November 2013.
ii
APPENDIX 3 Summary of the cost benefit analysis for Scenario 5 (Entire Expressway)
Cost Benefits Net Benefits Travel Construction Discounted VOC Accident Discounted Net Discounted Year O&M Cost Total Time Total Cost value Savings reduction Value Benefit value Savings
2016 138.1 0.0 138.1 138.1 0.0 0.0 0.0 0.0 0.0 -138.1 -138.1 2017 138.0 0.0 138.0 129.0 0.0 0.0 0.0 0.0 0.0 -138.0 -129.0 2018 163.0 0.0 163.0 142.3 0.0 0.0 0.0 0.0 0.0 -163.0 -142.3 2019 67.5 0.0 67.5 55.1 0.0 0.0 0.0 0.0 0.0 -67.5 -55.1 2020 0.0 2.3 2.3 1.8 2.0 0.9 0.2 3.1 2.4 0.8 0.6 2021 0.0 2.3 2.3 1.6 5.4 1.8 0.3 7.4 5.3 5.1 3.6 2022 0.0 2.3 2.3 1.5 6.4 2.0 0.3 8.8 5.8 6.5 4.3 2023 0.0 2.3 2.3 1.4 7.5 2.2 0.4 10.1 6.3 7.8 4.9 2024 0.0 2.3 2.3 1.3 8.5 2.5 0.5 11.5 6.7 9.2 5.3 2025 0.0 2.3 2.3 1.3 9.6 2.7 0.5 12.9 7.0 10.6 5.7 2026 0.0 2.3 2.3 1.2 10.7 3.0 0.6 14.2 7.2 11.9 6.1 2027 0.0 2.3 2.3 1.1 22.5 3.5 0.7 26.7 12.7 24.4 11.6 2028 0.0 2.3 2.3 1.0 34.4 4.2 0.7 39.3 17.4 37.0 16.4 2029 0.0 2.3 2.3 1.0 46.3 4.9 0.8 51.9 21.6 49.6 20.6 2030 0.0 21.2 21.2 8.2 58.1 5.7 0.8 64.7 25.1 43.5 16.9 2031 0.0 2.3 2.3 0.8 70.0 6.7 0.9 77.6 28.1 75.3 27.3 2032 0.0 2.3 2.3 0.8 81.9 7.7 1.0 90.6 30.7 88.2 29.9 2033 0.0 2.3 2.3 0.7 93.7 8.9 1.0 103.6 32.8 101.3 32.1 2034 0.0 2.3 2.3 0.7 105.6 10.1 1.1 116.8 34.6 114.5 33.9 2035 0.0 2.3 2.3 0.6 117.5 11.4 1.1 130.1 36.0 127.7 35.3 2036 0.0 2.3 2.3 0.6 129.3 12.9 1.2 143.4 37.1 141.1 36.5 2037 0.0 2.3 2.3 0.6 147.4 13.8 1.0 162.2 39.2 159.9 38.6
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2038 0.0 2.3 2.3 0.5 156.5 14.7 1.3 172.5 38.9 170.2 38.4 2039 0.0 2.3 2.3 0.5 165.6 15.6 1.4 182.6 38.5 180.3 38.0 2040 0.0 21.2 21.2 4.2 174.7 16.5 1.5 192.6 38.0 171.4 33.8 2041 0.0 2.3 2.3 0.4 183.7 17.4 1.5 202.6 37.3 200.3 36.9 2042 0.0 2.3 2.3 0.4 192.8 18.3 1.6 212.7 36.6 210.4 36.2 2043 0.0 2.3 2.3 0.4 201.9 19.2 1.7 222.7 35.8 220.4 35.5 2044 0.0 2.3 2.3 0.3 210.9 20.1 1.7 232.8 35.0 230.5 34.7 2045 0.0 2.3 2.3 0.3 220.0 21.0 1.8 242.8 34.1 240.5 33.8 2046 -113.1 2.3 -110.8 -14.6 229.1 21.9 1.9 252.8 33.2 363.7 47.8 Total 483.3 683.4 200.1
Note : The cost values in the ‘Construction cost’ column represent the economic cost of the project (after adjusting the financial cost, i.e. inclusive of taxes, to their economic value). The total construction cost has been distributed for the period of construction and the land acquisition cost has been added to year 1.
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APPENDIX 4 NESTM Traffic Zone System APPENDIX COLOMBO Western COLOMBO 3132131 WATTALA Western GAMPAHA 133 KELANIYA Western GAMPAHA 134 KELANIYA Western GAMPAHA 135 BIYAGAMA Western GAMPAHA 136 BIYAGAMA Western GAMPAHA 137 BIYAGAMA Western GAMPAHA 138 DOMPE Western GAMPAHA 139 WATTALA Western GAMPAHA 140 MAHARA Western GAMPAHA 141 MAHARA Western GAMPAHA 142 MAHARA Western GAMPAHA
143 DOMPE Western GAMPAHA 144 JA-ELA Western GAMPAHA 145 JA-ELA Western GAMPAHA 146 GAMPAHA Western GAMPAHA 147 GAMPAHA Western GAMPAHA 148 GAMPAHA Western GAMPAHA 149 ATTANAGALLA Western GAMPAHA 150 JA-ELA Western GAMPAHA 151 NEGAMBO Western GAMPAHA 152 KATANA Western GAMPAHA 153 KATANA Western GAMPAHA 154 MINUWANGODA Western GAMPAHA 155 ATTANAGALLA Western GAMPAHA 156 MINUWANGODA Western GAMPAHA 157 MIRIGAMA Western GAMPAHA 158 NEGAMBO Western GAMPAHA 159 KATANA Western GAMPAHA 160 DIVULAPITIYA Western GAMPAHA 161 DIVULAPITIYA Western GAMPAHA 162 MIRIGAMA Western GAMPAHA 163 GANGA IHALA KORALE Central KANDY 164 UDAPALATHA Central KANDY 165 DOLUWA Central KANDY 166 DELTOTA Central KANDY 167 UDUNUWARA Central KANDY 168 UDUNUWARA Central KANDY 169 KANDY FOUR GRAVETS Central KANDY 170 PATHAHEWAHETA Central KANDY 171 YATINUWARA Central KANDY 172 YATINUWARA Central KANDY
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173 HARISPATTUWA Central KANDY 174 KANDY FOUR GRAVETS Central KANDY 175 KANDY FOUR GRAVETS Central KANDY 176 KUNDASALE Central KANDY 177 HATHARALIYADDA Central KANDY 178 THUMPANE Central KANDY 179 POOJAPITIYA Central KANDY 180 AKURANA Central KANDY 181 PATADUMBARA Central KANDY 182 KUNDASALE Central KANDY 183 PANWILA Central KANDY 184 DEHIOWITA Sabaragamuwa KEGALLE 185 RUWANWELLA Sabaragamuwa KEGALLE 186 YATIYANTOTA Sabaragamuwa KEGALLE 187 WARAKAPOLA Sabaragamuwa KEGALLE
188 BULATHKOHUPITIYA Sabaragamuwa KEGALLE 189 WARAKAPOLA Sabaragamuwa KEGALLE 190 GALIGAMUWA Sabaragamuwa KEGALLE 191 KEGALLE Sabaragamuwa KEGALLE 192 ARANAYAKE Sabaragamuwa KEGALLE 193 MAWANELLA Sabaragamuwa KEGALLE 194 MAWANELLA Sabaragamuwa KEGALLE 195 RAMBUKKANA Sabaragamuwa KEGALLE 196 PANNALA North Western KURUNEGALA 197 PANNALA North Western KURUNEGALA 198 NARAMMALA North Western KURUNEGALA 199 ALAWUWA North Western KURUNEGALA 200 POLGAHAWELA North Western KURUNEGALA 201 Kurunegala_SW North Western KURUNEGALA 202 MALLAWAPITIYA North Western KURUNEGALA 203 MAWATHAGAMA North Western KURUNEGALA 204 RIDEEGAMA North Western KURUNEGALA 205 UDUBADDAWA North Western KURUNEGALA 206 KULIYAPITIYA WEST North Western KURUNEGALA 207 KULIYAPITIYA EAST North Western KURUNEGALA 208 WEERAMBUGEDARA North Western KURUNEGALA 209 Kurunegala_SW North Western KURUNEGALA 210 BINGIRIYA North Western KURUNEGALA 211 PANDUWASNUWARA WEST North Western KURUNEGALA 212 PANDUWASNUWARA EAST North Western KURUNEGALA 213 BAMUNAKOTUWA North Western KURUNEGALA 214 MASPOTA North Western KURUNEGALA 215 Kurunegala_NE North Western KURUNEGALA 216 IBBAGAMUWA North Western KURUNEGALA 217 RASNAYAKAPURA North Western KURUNEGALA
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218 KOBEIGANE North Western KURUNEGALA 219 WARIYAPOLA North Western KURUNEGALA 220 GANEWATTA North Western KURUNEGALA 221 NIKAWERATIYA North Western KURUNEGALA 222 MAHO North Western KURUNEGALA 223 POLPITHIGAMA North Western KURUNEGALA 224 KOTAWEHERA North Western KURUNEGALA 225 AMBANPOLA North Western KURUNEGALA 226 EHETUWEWA North Western KURUNEGALA 227 GALGAMUWA North Western KURUNEGALA 228 GIRIBAWA North Western KURUNEGALA 229 UKUWELA Central MATALE 230 YATAWATTA Central MATALE 231 MATALE Central MATALE 232 RATTOTA Central MATALE
233 AMBANGANGA KORALE Central MATALE 234 PALLEPOLA Central MATALE 235 NAULA Central MATALE 236 GALEWELA Central MATALE 237 DAMBULLA Central MATALE 238 WENNAPPUWA North Western PUTTALAM 239 DANKOTUWA North Western PUTTALAM 240 NATTANDIYA North Western PUTTALAM 241 MAHAWEWA North Western PUTTALAM 242 MADAMPE North Western PUTTALAM 243 CHILAW North Western PUTTALAM 244 ARACHCHIKATTUWA North Western PUTTALAM 245 PALLAMA North Western PUTTALAM 246 MUNDAL North Western PUTTALAM 247 MAHAKUMBUKKADAWAL North Western PUTTALAM 248 A ANAMADUWA North Western PUTTALAM 249 KALPITIYA North Western PUTTALAM 250 PUTTALAM North Western PUTTALAM 251 PUTTALAM North Western PUTTALAM 252 KARUWALAGASWEWA North Western PUTTALAM 253 NAWAGATTEGAMA North Western PUTTALAM 254 VANATHAVILLU North Western PUTTALAM 255 ELAHERA North Central POLONNARUWA 256 THAMANKADUWA North Central POLONNARUWA 257 HINGURAKGODA North Central POLONNARUWA 258 LANKAPURA North Central POLONNARUWA 259 MEDIRIGIRIYA North Central POLONNARUWA 260 PALAGALA North Central ANURADHAPUR 261 GALNEWA North Central ANURADHAPURA 262 IPALOGAMA North Central ANURADHAPURA A vii
263 KEKIRAWA North Central ANURADHAPUR 264 PALUGASWEWA North Central ANURADHAPURA 265 TAMBUTTEGAMA North Central ANURADHAPURA 266 THALAWA North Central ANURADHAPURA 267 THIRAPPANE North Central ANURADHAPURA 268 GALENBINDUNUWEWA North Central ANURADHAPURA 269 RAJAGANAYA North Central ANURADHAPURA 270 NOCHCHIYAGAMA North Central ANURADHAPURA 271 Nuwaragam Palatha North Central ANURADHAPURA Central A 272 NACHCHADOOWA North Central ANURADHAPUR 273 NUWARAGAMPALATA EAST North Central ANURADHAPURA 274 MIHINTALE North Central ANURADHAPURA 275 RAMBEWA North Central ANURADHAPURA 276 KAHATAGASDIGILIYA North Central ANURADHAPURA A 277 HOROWPOTHANA North Central ANURADHAPUR 278 KANTALAE Eastern ATRINCOMALEE 279 THAMBALAGAMUWA Eastern TRINCOMALEE 280 KINNIYA Eastern TRINCOMALEE 281 MUTTUR Eastern TRINCOMALEE 282 MORAWEWA Eastern TRINCOMALEE 283 TRINCOMALEE TOWN & Eastern TRINCOMALEE FOUR GRAVE* 284 TRINCOMALEE TOWN & Eastern TRINCOMALEE FOUR GRAVE* 285 TRINCOMALEE TOWN & Eastern TRINCOMALEE FOUR GRAVE* 286 GOMARANKADAWALA Eastern TRINCOMALEE 287 KUCHCHAVELI Eastern TRINCOMALEE
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APPENDIX 5 Scenario 1 Detail Volumes Daily Link Volumes on CE, A1 and A6 for Year 2021 (Scenario 1)
A1
ix
Daily Link Volumes on CE, A1 and A6 for Year 2026 (Scenario 1)
A1
x
Daily Link Volumes on CE, A1 and A6 for Year 2036 (Scenario 1)
A1
xi
Scenario 2 Detail Volumes Daily Link Volumes on CE, A1 and A6 for Year 2021 (Scenario 2)
A1
xii
Daily Link Volumes on CE, A1 and A6 for Year 2026 (Scenario 2)
A1
xiii
Daily Link Volumes on CE, A1 and A6 for Year 2036 (Scenario 2)
A1
xiv
Scenario 3 Detail Volumes Daily Link Volumes on CE, A1 and A6 for Year 2021 (Scenario 3)
A1
xv
Daily Link Volumes on CE, A1 and A6 for Year 2026 (Scenario3)
A1
xvi
Daily Link Volumes on CE, A1 and A6 for Year 2036 (Scenario3)
A1
xvii
Scenario 4 Detail Volumes Daily Link Volumes on CE, A1 and A6 for Year 2021 (Scenario 4)
A1
xviii
Daily Link Volumes on CE, A1 and A6 for Year 2026 (Scenario 4)
A1
xix
Daily Link Volumes on CE, A1 and A6 for Year 2036 (Scenario 4)
A1
xx
Scenario 5 Detail Volumes Daily Link Volumes on CE, A1 and A6 for Year 2021 (Scenario 5)
A1
xxi
Daily Link Volumes on CE, A1 and A6 for Year 2026 (Scenario 5)
A1
xxii
Daily Link Volumes on CE, A1 and A6 for Year 2036 (Scenario 5)
A1
xxiii