Within three months of assuming office, the Narendra Modi 3.0 government has unveiled infrastructure projects worth Rs 3.31 lakh crore. Not just the Cabinet approvals, the actual spending on core sector projects has also picked up. In July the capital expenditure was almost double of May and June, which were the peak election months.
The biggest focus area is the road sector, including expressways or rural roads. The new tenure has also brought in a change in approach to the infrastructure with regard to other areas like railways and hydro power.
However, private sector participation continues to be low in key areas like highways and railways, while there has been pick-up in public private partnership projects in seaport sector. The government avers the pace of infrastructure creation won’t be slowed due to financing constraints. While reliance on Budget funds is high and rising, efforts are being made to mitigate the burden on the exchequer via monetisation of brownfield assets –operational highway stretches and railway stations, land parcels etc This strategy appears to be more rewarding in the highway sector where both the toll-operate-transfer and the InvIT routes being employed with vigoour to raise resources via monetisation.
Still, analysts see early signs of a slowdown in infrastructure investments, and stress the need to bring in more private funds and global patient capital.
“Generally, Q2 is a lean quarter in terms of construction activity because of the monsoon, and hence the ramp-up in execution is expected from Q3 onwards. Construction entities catering to all major sub-sectors like road, railway, airport, metro, drinking and sewage water related projects are expected to benefit from government’s thrust on improving infrastructure,” said Ashish Modani, senior vice president at Icra.
From the grand vision of Bharatmala Pariyojana, ashift has been made to “Vision 2047”. The approval for new projects under Bharatmala was stopped in November last year and in August this year the first tranche of eight National High Speed Corridor projects was cleared by the Cabinet. The total cost of these projects will come to around Rs 50,655 crore and will result in the building of 936 km of highways.
Modani pointed out that steps like declaring date of project commencement after 80% right of way (ROW) availability; would help fast-track projects. Delays in land acquisition and consequent impact on project completion timelines, however, remained a key challenge, he said.
Another Rs 40,000 crore and Rs 50,000 crore of access-controlled projects are in pipeline and by December a total of Rs 2 lakh crore worth of highway projects would be approved, Minister for Road Transport and Highways Nitin Gadkari said at Indian Express Idea Exchange. The government’s plan is to have 50,000 km of expressways in the country functional. At present 4,000 km of expressways are already functional and construction work of 6.000 km more is in progress. The EPC entities present in irrigation space are seen to benefit from Rs 12,157 crore outlay for Polavaram project between FY25 and FY26.
The Union cabinet also recently approved the fourth phase of Pradhan Mantri Gram Sadak Yojana (PMGSY) to be implemented during FY2025-FY2029, with an outlay of Rs 70,125 crore, which augurs well for small/local contractors. Given the healthy order book of EPC entities as well as robust budgetary allocation, they are expected to register healthy growth of 12-15% in the current fiscal, Modani said. Under PMGSY will build 62,500 km of rural roads, connecting 25,000 habitations.
Vishal Kotecha, director and head-Global Infra Group, India Ratings and Research said that in the past 6-8 months awards of new projects have been dull, especially in the roads sector. “Next two quarters will be critical for the highway sector in terms of award,” he said. While implementation challenges are still there, funding may not be constraint, as “there is enough domestic and foreign capital to back good projects,” he noted.
The plan also is to increase logistics efficiency. The government’s aim is to break into the top 25 of the ranking by 2030. In 2023 India was ranked 38 out of 139 countries in the Logistics Performance Index ( LPI) of the World Bank. For logistics efficiency the enhancement of the highway network seeks to increase the average speed of a freight truck to more than 90 km per hour by 2047 from 25-40 km per hour now. Expressway expansion plan is expected to be completed by 2037. The increase in capacity of roads also aims to bring down the costs by half to Rs 1.6 per tonne per km by 2047
For people the aim is to increase the proportion of villages and towns that have accessibility or are just 50 km away from the trunk road network to more than 95% by 2030 from 89% at present. By 2047 the target is to get to 100%.
For railways the focus is on reducing the freight cost to less than half of present by 2047 through investments that increase the speed of freight trains 100 km per hour from 24 km at present. Four metro rail projects with a total cost of Rs 30,766 crore have also been approved. Another 11 railway projects which includes 967 km new lie and 121 km multi track have also been approved with the total cost of Rs 31,133 crore. However, PPP investments are still much less than expected levels in the sector.
In the last 10 years Indian port capacity has doubled and the long-term vision in the shipping sector is to bring the turnaround time to less than 20 hours by 2030 from 24-36 hours. Another goal is to have two Indian ports in the world’s top 10 by 2047 and become a major player in cargo transshipment in the Indian Ocean region. The cabinet in June approved setting up of a mega sea port at Vadhavan in Maharashtra with the total cost of Rs 76,220 crore, which on completion will be among the top 10 ports of the world.
In aviation, an airport at Varanasi has been approved from new terminals at Patna and Bagdogra airports. Varanasi airport will cost Rs 2870 crore. Patna and Bagdogra will cost another Rs 2969 crore. A revised scheme for supporting enabling infrastructure of hydroelectric projects has also been approved. The approval has also come for 12 smart industrial cities.