Sluggish highway construction greets new govt at the Centre

The over two-month long election process, and the start of the monsoon season in the country have pushed down the actual highway construction in the first quarter of FY25 even as expenditure on building infrastructure remained strong with the ministry of road transport and highway (MoRTH) deciding to frontload the capex plan for the sector.

The construction of highways slipped 14% to 1,934 km in April-June FY25 as against 2,250 km of infrastructure created in Q1 FY23, according to MoRTH data.

Not only has construction failed to gather momentum but highway awards have also slipped drastically to a mere 95 km in the first three months of the fiscal year as against 611 km in the same period last year.

Releasing the infrastructure statistics for the first two-month period last month, MoRTH had stated that due to the imposition of the Model Code of Conduct, projects could not be awarded in the early part of the year.

While construction and awards have slipped this year, MoRTH has kept pace with its capital expenditure to see that more and more projects get off the ground and are completed towards the latter part of the year. The ministry has incurred capex of about ₹60,461 crore in the first quarter period which accounts for 44.4% of capital outlay under vote on account provision for the first five months of FY25 amounting to ₹1.36 trillion.

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The budget has provided FY25 capex of ₹2.72 trillion to MoRTH, against the annual allocation, capex expenditure so far (April-June) has been 22.3% of budget estimates for FY2024-25.

Interestingly, ₹57,925 crore of capex was spent till May this year, meaning that actual expenditure has also fallen drastically in June to just about ₹2,500 crore.

“Our aim this year is to scale up construction by deploying more capex in the initial period of the fiscal year. About half of the vote on account capital outlay had been used in just three months and full sanctioned amount for the year may be used up early to ensure that construction momentum is maintained and activity picks up pace after monsooon months,” said an official of MoRTH on condition of anonymity.

Though actual targets for highway construction have not yet been formalised by MoRTH, the official said that it would be similar to last year between 12,000 km and 13,000 km.

The confidence of highway construction maintaining pace in the coming months also comes from a large number of detailed project reports (DPRs) for projects being completed by MoRTH during the period of model code of conduct. This would step up highway awards and keep the pipeline of projects at healthy levels. Some complex express or access controlled highways projects are also put up for awards this year and the government is also looking at reviving the build operate transfer (BoT) mode of highway awards. This mode allows government to take a backseat while investment in projects is made by private sector companies winning the construction bids.

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In 2023-24, India constructed the second-highest level of highways even though it missed out achieving the record annual construction target for the year by a wide margin. Last fiscal, a total of 12,349 km of highways were constructed, which is just lower than the record construction so far of 13,327 km reported in the covid year 2020-21.

While highway construction picked pace last year relative to the previous two years, MoRTH also used up its entire record capex provided by budget FY24. This is the first time that capex expenditure has touched 99.93% of the revised capex provided in the budget of ₹2.64 trillion.    

Officials said that capex expenditure of MoRTH has remained over the 90% level in the previous five years and, in fact, above 98% in three of the five years with the exception of FY20 when it hit 91% and FY22 when it stayed at 93%.

Officials said that going forward the expectation is that in the current fiscal the entire (100%) capex of ₹2.72 trillion provided in FY25 would be spent to build highways.