Target of 25,000km road project awards unlikely to be met in FY17
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The target of awarding 25,000km of road projects in the current fiscal year is unlikely to be met going by the data of the first half, analysts say.
The target, set by the ministry of road transport and highways and the National Highways Authority of India (NHAI), was announced in April. It was seen as ambitious goal from the very start, given that the central government is already building roads at the fastest pace ever.
The Nitin Gadkari-led ministry is also taking several other measures to make it easier for companies to win and execute these projects.
Last fiscal year, the government awarded 10,000km of projects. The execution record in the first half of this fiscal year makes achieving the 25,000km target appear unlikely, Jefferies India Pvt. Ltd analyst Ankit Fitkariwala wrote in a 24 October report.
“Looking at current pipeline of projects, we expect that previous year awards of 10,000km would probably be repeated for full year FY17 as well. We do not expect overall FY17 awards to be anywhere close to 25,000km that the ministry was expecting at the beginning of the year,” Fitkariwala wrote.
While the September quarter is typically weak for road projects in terms of execution and traffic, a stronger-than-expected monsoon this year has also likely impacted execution of road projects.
According to the NHAI website, it had awarded 764km of projects from April to July. It is yet to report data for August and September.
India awards road projects under three models: engineering, procurement, and construction (EPC); build, operate, and transfer (BOT); and the hybrid annuity model (HAM).
NHAI, the road ministry and states together have likely awarded projects of about 6,000km in the first half of the year across the three models, according to Devam Modi, an analyst at Equirus Securities Pvt. Ltd. While he does not expect the current fiscal’s target to be met, he expects awards to be significantly higher than the 10,000km achieved last fiscal year.
Projects of about 2,200km each have been awarded by NHAI and the ministry up to September this fiscal, totalling to about 4,500km, according to Jefferies.
Another brokerage analyst expects the ministry and NHAI to award 12,000-15,000km in total this fiscal. He asked not to be named as he is not authorized to speak to reporters.
NHAI alone has active tenders of 1,200km to be bid out over the next month, largely based on the EPC and HAM models, according to a report last week by ICICI Securities.
India has the world’s second largest road network, running to about 4.8 million km, but major highways constitute a small percentage of that. Gadkari has set a long-term target of building 100km of roads a day, as against last year’s target of 30km. India currently constructs roads and highways at a rate of 21km per day.
Road companies including PNC Infratech Ltd, Sadbhav Engineering Ltd, IRB Infrastructure Developers Ltd and Ashoka Buildcon Ltd have been benefiting from the increased pace of awards.