Lower award target for FY2019 puts ambitious Bharatmala programme on challenging terrain
The Ministry of Road Transportation & Highways (MORTH) has fixed a lower award target of around 20,000 km of National Highways for FY2019 from 25,000 km in FY2018.
ROADS & HIGHWAYS

Lower award target for FY2019 puts ambitious Bharatmala programme on challenging terrain

The Ministry of Road Transportation & Highways (MORTH) has fixed a lower award target of around 20,000 km of National Highways for FY2019 from 25,000 km in FY2018. “This lower target is however about 17 per cent more than the 17,055 km awarded during FY2018, which by far has been the best year for the MORTH in terms of execution and awards. Various de-bottlenecking measures taken by the government yielded positive results as reflected in the execution rate of 26.9 km per day while reflecting a CAGR of 23 per cent during FY2014-FY2018. Similarly, awards grew at a CAGR of 47 per cent to 17,055 km in FY2018 from 3,621 km in FY2014,” says an ICRA report.

In October, 2017 the government launched the new road development programme (including Bharatmala Pariyojana) – the largest road development programme till date with an ambitious target of completing 83,677 km by FY2022. In order to achieve this, the award rate should be upwards of 40,000 km for the next two years – FY2019 and FY2020.

 

At the current rate of a 17 per cent annual increase in awards, around 71,000 km can be awarded by FY2021 in which case the execution could be in the range of 49,000-50,000 km (assuming average construction period of two and a half years) by FY2022, which is around 60 per cent of the target.

Unlike in the past, wherein projects were awarded without acquiring requisite land, the Bharatmala awarding process is expected to be more transparent with tighter pre-requisites. Nearly 80 per cent of the RoW for the BOT projects and 90 per cent of RoW for the EPC projects will be made available before awarding. Lower award targets may also be a result of a longer land acquisition process and lack of detailed project reports (DPRs).

Shubham Jain, Vice-President & Sector Head, Corporate Ratings, ICRA, said: “In order to catch up with the ambitious target for new highway development programme, which is 83,677 km by FY2022, the award rate has to be more than double from what it was in FY2018; the target for FY2019 has instead been lowered to 20,000 km from 25,000 km last year, which makes the achievement of Bharatmala targets even more challenging.”

Given the widening gap between the award and the execution rate, the MORTH has decided to focus more on execution in current year. The execution target for FY2019 has been set at 16,420 km at 45 km per day – 67 per cent higher than what was achieved in FY2018. The biggest hurdle is unquestionably the land acquisition issue, which can hinder road development. Therefore, the award rate and consequently the success of the new highway programme critically hinges on the pace of land acquisition.

The Ministry of Road Transportation & Highways (MORTH) has fixed a lower award target of around 20,000 km of National Highways for FY2019 from 25,000 km in FY2018. “This lower target is however about 17 per cent more than the 17,055 km awarded during FY2018, which by far has been the best year for the MORTH in terms of execution and awards. Various de-bottlenecking measures taken by the government yielded positive results as reflected in the execution rate of 26.9 km per day while reflecting a CAGR of 23 per cent during FY2014-FY2018. Similarly, awards grew at a CAGR of 47 per cent to 17,055 km in FY2018 from 3,621 km in FY2014,” says an ICRA report. In October, 2017 the government launched the new road development programme (including Bharatmala Pariyojana) – the largest road development programme till date with an ambitious target of completing 83,677 km by FY2022. In order to achieve this, the award rate should be upwards of 40,000 km for the next two years – FY2019 and FY2020.   At the current rate of a 17 per cent annual increase in awards, around 71,000 km can be awarded by FY2021 in which case the execution could be in the range of 49,000-50,000 km (assuming average construction period of two and a half years) by FY2022, which is around 60 per cent of the target. Unlike in the past, wherein projects were awarded without acquiring requisite land, the Bharatmala awarding process is expected to be more transparent with tighter pre-requisites. Nearly 80 per cent of the RoW for the BOT projects and 90 per cent of RoW for the EPC projects will be made available before awarding. Lower award targets may also be a result of a longer land acquisition process and lack of detailed project reports (DPRs). Shubham Jain, Vice-President & Sector Head, Corporate Ratings, ICRA, said: “In order to catch up with the ambitious target for new highway development programme, which is 83,677 km by FY2022, the award rate has to be more than double from what it was in FY2018; the target for FY2019 has instead been lowered to 20,000 km from 25,000 km last year, which makes the achievement of Bharatmala targets even more challenging.” Given the widening gap between the award and the execution rate, the MORTH has decided to focus more on execution in current year. The execution target for FY2019 has been set at 16,420 km at 45 km per day – 67 per cent higher than what was achieved in FY2018. The biggest hurdle is unquestionably the land acquisition issue, which can hinder road development. Therefore, the award rate and consequently the success of the new highway programme critically hinges on the pace of land acquisition.

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