Highway construction reaches scorching pace; Hits record 34 km/day

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Updated: Mar 17, 2021 12:21 PM

Assuming construction pace in March to be at the same level as in February, 2020-21 would likely see new highway stretches of 13,400 km (37 km per day) built, according to officials. In the past, it was only in 2018-19 that the pace of building of highways neared the 30 km/day mark.

While minister for road transport and highways Nitin Gadkari is confident of achieving 40 km/day construction pace soon, many stakeholders also share the optimism.While minister for road transport and highways Nitin Gadkari is confident of achieving 40 km/day construction pace soon, many stakeholders also share the optimism.

Despite the pandemic and the elusive private investor, highway construction has reached a scorching pace in the current fiscal. While the pace of construction was a mere 12 km per day in 2014-15, it was nearly 34 km per day, the sharpest rate seen in any year, in the April-February period of the current fiscal (see chart).

Assuming construction pace in March to be at the same level as in February, 2020-21 would likely see new highway stretches of 13,400 km (37 km per day) built, according to officials. In the past, it was only in 2018-19 that the pace of building of highways neared the 30 km/day mark.

While minister for road transport and highways Nitin Gadkari is confident of achieving 40 km/day construction pace soon, many stakeholders also share the optimism.

Usually, construction reaches its peak in the January-May period of a year. The pace touched a record of 76 km a day in the week commencing January 8, a source said. In February alone, all executing agencies together constructed 2,009 km national highways at a whopping speed of 71.75 km per day.

But for the first 20 days of April 2020, wherein no construction activity was allowed due to the lockdown, the pace of construction this year would have touched the 40-km a day-mark.

Construction of 1 kilometre 10-lane highway is still measured as 1 km and the same holds true for two-lane highway.

As on March 15, 2,084 highway projects with a total length of 63,523 km are under construction in the country at a cost of `7.89 lakh crore.

Providing the highest-ever `1.18-lakh-crore capital outlay for the ministry of road transport and highways for 2021-22 in the Budget, finance minister Nirmala Sitharaman said more than 13,000 km length of roads, at a cost of `3.3 lakh crore, has already been awarded under the `5.35-lakh-crore Bharatmala Pariyojana project. Of this, 3,800 km of the roads have been constructed. By March 2022, another 8,500 km projects would be awarded and an additional 11,000 km of national highway corridor would be completed.

The increasing pace of highway construction, analysts believe, is the result of a slew of measures the government initiated in recent times like shifting from milestone-based billing (typically ranging between 45-75 days) to monthly billing and release of retention money, performance security in proportion to the work already executed which have helped in reducing cash conversion cycle favouring the contractors.

The recent relaxation of financial capacity and widening the definition of core sector (technical capacity) by including segments like hospitals, hotels, oil & gas, warehouses, among others, will drive more EPC players towards infrastructure projects, especially road, which is already overcrowded. The competitive intensity is expected to increase manifold.

“If the liquidity boosting measures are continued; this along with relaxation in qualifications for bidders could result in steep rise in execution – more than 40 km/day going forward,” Icra’s Rajeshwar Burla said.

While the construction speed has been accelerated with mostly government funds – read EPC contracts – and the hybrid annuity model projects (where little risk is taken by the private developers), there have lately been signs of nascent recovery of the BOT-toll model, which is pure-play public-private partnership model.

At least four firms — IRB Infrastructure, Adani Group, GR Infraprojects and PNC Infratech — have recently submitted bids in both the national highway stretches totalling 132 km under the revised, investor-friendly build-operate-transfer (toll) model.

IRB Infrastructure’s chairman and MD Virendra Mhaiskar recently told FE that the 50 km/day construction is eminently achievable in the next two years as a huge number of projects are being awarded nowadays and the environment is also conducive for doing business.

The highway sector seems to again witness investors’ interest in pure public-private-partnership (PPP) projects, the share of which in new awards has declined precipitously for nearly a decade and drawn a blank in the last two financial years.

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