Land, clearance delay: Road projects of 800 km face execution risk, says Crisil

By: |
Mumbai | Updated: November 23, 2018 5:50:21 AM

Crisil Research lowered its execution forecast for the National Highways Authority of India (NHAI) to 3,600-3,800 km this year

Based on the current status of starting dates in both HAM and engineering, procurement and construction (EPC) contracts, execution for NHAI projects could reach 9.9 to 10.4 km per day this year. (Representational photo: Reuters)

Road projects of about 800 km are facing execution risks due to delay in land acquisition and regulatory clearances, and this may affect the overall length of roads constructed this year.

Crisil Research on Thursday lowered its execution forecast for the National Highways Authority of India (NHAI) to 3,600-3,800 km this year, from an earlier estimate of 4,300 km, saying many projects awarded under the hybrid annuity model (HAM) are still awaiting appointed dates or starting dates when the NHAI hands over the contract letter to the developer.

The research firm said it believes land acquisition for most projects are at an advanced stage, but lenders will begin disbursing funds only after the mandatory 80% land is at least close to being acquired. This means that some of the projects could receive their starting dates in December.

Based on the current status of starting dates in both HAM and engineering, procurement and construction (EPC) contracts, execution for NHAI projects could reach 9.9 to 10.4 km per day this year.

This would be lower than 11.8 km per day estimated by the research firm, but still higher than last year’s 8.4 km per day.

Crisil also said projects spanning 390 km are awaiting funding, of which projects with length of 180 km have already exceeded the five-month window that is mandated by the NHAI for achieving financial closure. For projects that have received funding, the closure has been done at an 80:20 debt-to-equity ratio, resulting in an equity share of just 12% of the total project cost being borne by the developer.
Crisil pointed out that as a result, lenders have turned even more cautious in financing HAM projects.

Banks continue to have apprehensions over the hybrid model, and in fact, the number of banks interested in lending to HAM projects have halved, compared with the period prior to when the model was introduced.

FE reported earlier this week that a record 9,829 km of national highways were built in FY17-18. The figure was 8,231 km in 2016-17, 6,061 km in 2015-16 and 4,410 km in 2014-15.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Indian Railways unveils swanky new train for IRCTC Buddhist circuit! Check all special features
2Delhi Metro Phase-IV project: Why the wait for Delhi government’s approval just got longer!
3Flyers from Varanasi Airport to be among first who can board flights via facial recognition technology!