Sharp rise in commodity prices slows down construction of highways

For the 2022-23 fiscal, the ministry of road transport and highways (MoRTH) has set a whopping 50km a day target for highway construction. It translates a little over 18,000 km for the entire fiscal.

During the April-May period of the current year, a total of 1,307 km highway has been constructed by all implementing agencies including the National Highways Authority of India (NHAI), data compiled by MoRTH revealed.
During the April-May period of the current year, a total of 1,307 km highway has been constructed by all implementing agencies including the National Highways Authority of India (NHAI), data compiled by MoRTH revealed.

A sharp rise in commodity prices has taken a toll on the construction of highways. In the first two months of the current fiscal, the pace of highway construction stood at just 21 km a day, compared to 24 km a day recorded in the same period last fiscal, and 29 km per day achieved in the whole of FY22.

The current year’s pace, however, is higher than that recorded in the pandemic-hit first two months of 2020. For the 2022-23 fiscal, the ministry of road transport & highways (MoRTH) had set a whopping 50 km a day target for highway construction. It translates into a little over 18,000 km for the entire fiscal.

During the April-May period of the current year, a total of 1,307 km highway has been constructed by all implementing agencies, including the National Highways Authority of India (NHAI), according to data compiled by the ministry of road transport & highways.

Analysts linked the decline in the pace of construction to high prices of construction materials like cement, steel and bitumen. They also believe that while the prices of such commodities have started cooling in the past two weeks, the onset of the monsoon might impede the pace of construction in the next two months or so.

“Notwithstanding the price escalation clauses in the agreement, the high volatility in commodity prices, after witnessing a huge increase in H2 FY2022, has made some of the contractors to be on a wait-and-watch mode. Consequently, it has affected the pace of execution in the first two months,” said Icra’s Rajeshwar Burla.

“With prices of some of the major commodities like steel, etc moderating in the last couple of weeks, the pace of execution should improve. However, unfortunately, now we are heading into the monsoon season and therefore it may not result in tangible improvement in execution pace,” he said.

Project awards also declined to just 496 km in the April-May period of the current fiscal, as against 663 km in the same period last fiscal and 747 km a year before. The MoRTH targets to award 18,000-km highway project length in the current fiscal as well.

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