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Funding crunch, rising construction costs may derail India’s roads sector

September 2019
With NHAI and the private sector restrategising, funding crunch and the increasing construction costs may derail the country’s roads and highways sector. Recently, the Prime Minister’s Office (PMO) stated to NHAI that the government is reportedly not keen to sustain its large investments in building highways. Further, as per reported, industry analysts and highway developers are of the opinion that the private sector too is not keen to do so, as it is becoming more risk-averse in the highways sector.

NHAI will continue to raise debt to fund the expansion of road infrastructure, reportedly stated Union Minister for road transport and highways Nitin Gadkari. It is reportedly in talks with the State Bank of India (SBI) and Life Insurance Corporation (LIC) of India to raise Rs 750 billion this year.

As per a SBI Cap Securities report, the highways developer construction costs have surged, led by a 30 per cent annualised growth in average land acquisition cost from 6.8 million per hectare in FY2013 to 34 million per hectare now.