Road ministry blames Union cabinet for delay in awarding of highway contracts

The cabinet committee on economic affairs (CCEA) had approved the first phase of Bharatmala Pariyojana in 2017. (Photo: Bloomberg)
The cabinet committee on economic affairs (CCEA) had approved the first phase of Bharatmala Pariyojana in 2017. (Photo: Bloomberg)

Summary

  • Lower awards come on the back of the ministry also missing out on its highway construction target for the third successive year

New Delhi: Delays in getting cabinet approvals impeded India's trajectory of road development in the just-concluded fiscal, according to a report from the ministry of road transport and highways (MoRTH). 

Awards of highway-development contracts ended up with a big shortfall in FY24. “Awards stood at 8,581 km against a target of 13,290 km. Major shortfall was because of Bharatmala where the revised approval of the Cabinet could not be obtained," the ministry said in its latest monthly summary report prepared for the cabinet.

Lower awards come on the back of the ministry also missing out on its highway construction target for the third successive year, with total construction standing at 12,349 km against a target of 13,814 km. 

A shortfall in award of highway projects impacts pace of construction in subsequent years due to a decline in the pipeline of projects where work could be initiated.

“The awards have remained muted last year as the government has been cautious in awarding projects where the land acquisition and associated permits are not in place," said Ashish Suman, Partner, JSA Advocates & Solicitors. “Also, delay in cabinet approval for revised cost estimate for Bharatmala Phase I, lack of clarity on model of project development (with government keen to revive the BOT-Toll model) and the general elections have delayed construction and awards of highways." 

According to an earlier estimate by ratings agency ICRA, the project cost under the Bharatmala Pariyojana programme, which entails construction of 34,800 km of highways, has more than doubled to 10.64 trillion relative to the initially expected amount, at an average cost of 31.6 crore per km, owing to the steep rise in input and land acquisition costs. 

The cabinet committee on economic affairs (CCEA) had approved the first phase of Bharatmala Pariyojana in 2017. It was to cost 5.35 trillion and was to be completed by 2022.

As of December 2023, 76% of the target or 26,418 km have been awarded for construction, and road length of about 15,549 km has been completed. But the remaining projects could not be awarded as revised cost estimate of the programme could not be approved by the cabinet.

The projects under Bharatmala Pariyojana are mainly funded by the central government and resource mobilization is done by the roads ministry.

Officials say that balance projects under Bharatmala I would be integrated with Vision 2047 plan of the ministry that would entail adding more than 75,000 km of highways over a decade and more. A cabinet approval for the Vision 2047 plan is expected after a new government is formed at the Centre, a senior official aware of the matter said on condition of anonymity.

Queries sent to MoRTH remained unanswered till press time.

Though awards have remained muted in FY24, MoRTH plans to use the model code of conduct (MCC) period in the run-up to general elections to complete the detailed project reports (DPRs) of about 10,000 km of highways. This is aimed at speeding up contract awards and construction as soon as the new government takes charge.

These DPRs are expected to be completed over the next three months using the PM Gati Shakti platform so that the awards of over 2 trillion worth of sanctioned projects are fast-tracked.

Apart from awards, the ministry's monthly summary report said that its performance has remained good on various other targeted projects. 

The ministry has made a capital expenditure of 3.01 trillion in FY25, the highest ever (25% more than 2.41 trillion in FY 23, the previous highest). Also, private investment of 34,805 crore is FY24 is the highest ever (59% more than 21,897 crore in FY23 and 17% more than 29,770 crore in FY16, the previous highest).

While construction slipped from the target, at 12,349 km [34 km/day], it was still the second highest ever so far. The previous highest was 13,327 km in FY21 (which included strengthening of 4,900 km)].

The ministry also awarded 162 way-side amenity projects in FY24, which is more than the cumulative awards of 160 projects till last year.

In terms of asset monetization, the ministry monetized the most assets in FY24, worth 40,314 crore (72% more than 23,336 crore in FY 23, the previous highest). 

Monetization in roads and highways means that publicly funded and revenue generating (through tolls) projects are offered to private entities under toll operate transfer (ToT) through the bidding route. 

Similarly, MoRTH also offers completed road project to NHIT, the InvIT floated by NHAI, for a price determined by it. Also, monetisation in a minuscule way, raises funds through securitisation of future toll revenues.

 

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