Highways construction off to brisk start in FY20

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Updated: July 8, 2019 4:17:37 AM

First two months of fiscal have seen roads being built at a pace of 28.5 km/day even as project awards are yet to shed last year’s sluggishness

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The first two months of the new fiscal have been good for highway construction in the country, with the pace going up by 9.6% to 28.5 km/day during the April-May period, as against 26 km/day in the year-ago period. A revival on the award front is yet to materialise, however, with the first two months seeing 241 km of projects being awarded, compared with 561 km in the corresponding period last year.

Owing to a jump in the last quarter, construction clocked a pace of 29.21 km/day in FY19. As for project awards, the pace had slowed down in the last year of the National Democratic Alliance’s first term in power, with a total of 5,470 km of projects being awarded in FY19—the figure stood at 17,055 km in the preceding fiscal (FY18).

Commenting on the construction rate in FY20, sources in the ministry of road transport and highways (MoRTH) said the pace would accelerate further in the months to come. Road Transport and Highways Minister Nitin Gadkari has set a highway construction target of 40 km/day for the current fiscal.

The agencies responsible for construction built 1,710 km of highways in the April-May period, compared with 1,562 km last year, the sources said. The National Highways Authority of India (NHAI) managed 8.63 km/day, as against 8.78 km/day last year. The performance of MoRTH has improved from 13 km/day in FY19 to 15 km/day in YTDFY20.

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The ministry is largely implementing projects via the EPC route wherein the government bears all project costs. On the other hand, NHAI projects are increasingly being executed through the hybrid annuity model (HAM), an improved public-private-partnership (PPP) model in which the government bears 40% of project costs.

Though pure-play PPP projects which had come to a grinding halt by the end of the United Progressive Alliance’s (UPA’s) second stint in power (2014) haven’t picked up during the NDA years, the construction pace has gradually improved —from 11.6 km/day in FY14, the last year of UPA-2, to 29.21 km/day in FY19—thanks to a higher level of efficiency in government-funded projects and the formulation of concessions-driven HAM ventures.

The fast-tracking of projects has happened despite large private investors deserting the sector after their projects floundered due to lower-than-expected toll receipts. Banks too have been reluctant to resume lending to the sector for a considerable part of the Modi government’s stint in power.

Analysts say that though things have improved a lot in recent years, problems relating to land acquisition and utility shifting, non-availability of aggregates, poor performance of contractors and delay in clearances continue to be hurdles in the way of rapid construction. Funds are also a concern, with the NHAI needing to borrow as much as `75,000 crore from the markets this year. The Union Budget has mandated NHAI raising equity by monetising more assets. Rating agency ICRA estimates NHAI’s total outstanding debt would increase to `3.30 lakh crore by March, 2022 from `1.79 lakh crore in March, 2019.

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