With a 10,000 km target set aside for the construction of National Highways in FY2018-19, this sector spurs maximum construction opportunities for contracting companies. And reports indicate that 6,715 km has been achieved as on December 31, 2018. According to Asheesh Sharma, Member-Finance, National Highways Authority of India (NHAI), “This year, the amount of construction we do will be the highest.”
“This year, our focus has been on the FC of HAM projects,” says Sharma. “Plus, we now ensure we award projects only when 80 per cent of the land is in our possession. So even if the award date gets shifted, at least the land is there. That has been a major change this year.”
Industry rumours reveal that this challenge led to NHAI awarding projects primarily on the EPC route. But even in EPC projects, developers are finding it difficult to procure performance and mobilisation bank guarantees. However Sharma clarifies, “We have been awarding projects on the EPC mode only in the case of greenfield projects. As a policy, we have decided to award about 60 per cent of projects under HAM.”
“There have been pressures given the challenges of fiscal management where there is a dependence on the government for funding through the Budget,” says Madan Sabnavis, Chief Economist, CARE Ratings. He adds that the latest budget has an allocation of about Rs 370 billion, which is supported by extra budgetary resources. The Ministry of Roads, Transport and Highways, along with its implementing bodies NHAI and NHIDCL, has awarded over 51,000 km of national highways over the past four years. The award rate has climbed from 21.9 km per day to around 46.7 km per day. Construction rate, too, has increased from 12.4 km per day to 26.9 km per day. The award rate has grown 113 per cent and the construction rate has increased by 117 per cent. These two parameters taken in isolation indicate a sizeable improvement in the development of the road network. Additionally, budgetary allocation has doubled from Rs 350 billion in FY15 to Rs 710 billion in FY19, a 100 per cent increase over the four-year period.