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New highway development plan provides huge opportunities for construction companies; however, target looks ambitious: ICRA

November 2017

The Cabinet has approved the proposal for Bharatmala Pariyojana Phase-I along with other programs on October 24, 2017, which involves national highway development of around 83,000 km (including Bharatmala Pariyojana Phase-I is 24,800 km) by FY2022. This could result in significant jump in annual awards – more than 25,000 km per annum over next three years and consequently provides huge opportunities for construction companies. After National Highways Development Project (NHDP), Bharatmala Pariyojana is the largest road development program to be undertaken by GoI. NHDP, the largest highways project ever undertaken in the country till date, is being implemented by the National Highways Authority of India (NHAI) since 2000 had achieved a progress of 26,255 km as on March 31, 2017, after 17 years. Given this track record, completing 83,000 km by FY2022 looks extremely ambitious.

Table1: Corridors under Bharatmala Pariyojana Phase-I

Typeof corridor

Lengthin km

EconomicCorridors

9,000

Inter-corridor& feeder Routes

6,000

NationalCorridors Efficiency Programme

5,000

Border& International connectivity roads

2,000

Coastal& port connectivity roads  

2,000

Expressways

800

Remainingportion of National Highways Development Project (NHDP)

10,000

(Source:NHAI)



Shubham Jain, Vice President & Sector Head, Corporate Ratings, ICRA, says: “NHDP execution suffered both on account of funding and approval related issues. While the dependence on the private sector investments for the new program is low when compared to the twelfth five year plan which could result in faster awards; securing right of way by complying with Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (RFCTLARR) Act is going to be a challenge. Therefore, the success of the program critically hinges on the pace of land acquisition along with other requisite approvals.”

The estimated fund requirement for development of NHs under various schemes and proposed Phase-I of Bharatmala Pariyojana is about Rs 692,324 crore, up to FY2022. The sources of funds include Gross Budgetary Support (GBS) including the National Highways’ share of the Central Road Fund (CRF) cess, toll remittance, expected monetisation of NHs through the Toll-Operate-Transfer (TOT) route, market borrowings by the National Highways Authority of India (NHAI) and private sector investment. The estimated share of private sector investment and expected monetisation through the TOT route during this period is about Rs 106,000 crore and about


Rs 34,000 crore respectively; which together form about 20.22 per cent of the total estimated fund requirement of Rs 692,324 crore.


Adds Jain, “Upwards of Rs 130,000 crore per annum of gross budgetary allocations are required to support this program to meet the proposed timelines which is a twofold increase from current allocations.”

Total number of 4,076 man-days are required for construction of one kilometre of a four-lane highway. Therefore, the new highway development programme could provide employment equivalent to 33.83 crore man-days (of which Bharatmala accounts for 10.11 crore man-days) without adjusting for seasonality says ICRA.