The costs incurred to build/ renovate/ rehabilitate an asset or provide a service is referred to as the capital cost of the project (also termed as project cost) while recurrent costs during operation and maintenance of the same is termed as the operation and maintenance (O&M) cost.
The project cost is estimated primarily from the base construction cost (sum of costs associated with the construction of all project facilities) for a selected development option, derived from the technical feasibility study. Other costs such as escalation in prices, contingencies, pre-operative costs, financing costs and interest costs during construction (IDC) are added to the base construction cost to arrive at the estimated project cost.
| Estimated Project Cost The components of the Estimated Project Cost typically include: Base Construction Cost + Financing cost + Preliminary and pre-operations cost + Interest during construction and financing costs + Escalation + Contingency |
Correct calculation of the "Total Project Cost" or "TPC" is important in any project proposed for development under PPP framework as TPC has a bearing on certain commercial terms of the PPP arrangements. For instance, as per the MCA for development of National Highways, in the event of a default resulting in termination, the payments to be made by the public entity to the private entity is indirectly linked to TPC. Furthermore the performance security to be furnished by the private entity is also linked to TPC. The TPC defined in the MCA for development of National Highways under PPP framework is explained below:
| Meaning of Total Project Cost (TPC) as per MCA MCA for development of National Highways defines Total Project Cost (TPC) as means the lowest of: • the capital cost of the project, (less equity support) as set forth in the financial package; • the actual capital cost of the project upon completion of the project (less equity support); and • a sum of Rs. ***** crore (Rupees ***** crore), (as mentioned in the Feasibility Report/ DPR) less Equity Support. |