BackHighway construction falls again, gets off to a poor start in FY2024
The data showed only about 523 km of highways were been built in April, 2023, at just 17.4 km per day as against a target of over 45 km per day in FY24.
PremiumNew Delhi: Highway construction in April fell 75% sequentially to just over 500 km, according to data from the ministry of road transport and highways, marking a poor start to the government’s road-building target for the year.
By contrast, 2,250 km of highways were laid down in March, which could be the result of government agencies rushing to hit the target at the close of the financial year. The April numbers raise concerns that road construction targets may be missed for the third consecutive year in FY24 in the run up to the general election.
The data showed only about 523 km of highways were been built in April, 2023, at just 17.4 km per day as against a target of over 45 km per day in FY24. The April road work is even lower than the 578 km of highways built in April 2022 after the third wave of the pandemic.
“The highway construction work continues to be plagued by delays in land acquisition at the state level. Most often road projects are taken up by contractors without full clearance (90% as mandated) and this creates hurdles in starting work resulting in lower highway construction as seen for the past couple of years," said P C Grover, director general, National Highways Builders Federation (NHBF).
“There are a few other issues such as delays in release of payment to contractors that holds up projects, but land acquisition remains the main reason for slowing down."
The slow pace in April has come at a time when construction activity normally picks up pace ahead of a monsoon season slowdown.
Road projects awards have also fallen in April to half of previous year’s numbers at a mere 114 km against 201 km in April 2022.
Lower awards mean the pace of highway development may slip further with a lower inventory of projects to undertake.
Road projects are expected to see a slowdown in the fourth quarter of the current fiscal owing to upcoming general elections.
According to a report by ICRA Research, the award of road and highway sector projects is expected to decline by a sharp 25% during FY24 in the run-up to general elections next year.
So, only around 9,000 km of highways may be awarded in FY24, as against an award of over 12,000 km of highways in FY23.
The expected decline is similar to trend seen before the 2019 general elections when awards fell even more sharply from over 17,000 km in 2018 to just about 5,500 km in 2019.
Lower awards mean the pace of highway development may slip further with a lower inventory of projects to undertake.
The road projects are expected to witness a slowdown in the fourth quarter of the current fiscal owing to upcoming general elections. According to a report by ICRA Research, the award of road and highway sector projects is expected to decline by a sharp 25% during FY24 in the run-up to general elections next year. So, only around 9000 km of highways may be awarded in FY24, as against an award of over 12,000 km of highway in FY23. The expected decline is similar to trend seen ahead of the 2019 general elections when awards fell even more sharply from over 17,000 km in 2018 to just about 5,500 km in 2019.
Along with a decline in awards, the elections may also slowdown construction though the hope is that work on road projects may speeded up in months post monsoon in the third quarter to make up for any loss in the last quarter period.
The continuing sluggish pace of road construction this year has come on the back of two consecutive years of failure of MoRTH to achieve the targeted work. The year FY23 ended with 28.3 km/day of construction with overall 10,331 km of highways being built in the year against a target of 12,500 km. A year before that in FY22, only about 10,457 km highways could be constructed at 28.64 km per day on a target of 12,200 km.
On a positive note, ICRA said in its latest report on the sector that there could be a substantial ramp-up in road execution activity in FY2024 by 16-21% to 12,000-12,500 km, in the backdrop of a healthy pipeline of projects, increased capital outlay by the Government of India and focus on project completions, ahead of the general elections.
“The execution was impacted in H1 FY2023, on account of elevated commodity prices as well as prolonged monsoons in certain geographies, which affected the productive days. The situation improved in H2 FY2023 with road construction witnessing a YoY growth of 2%, thereby containing the overall decline at 1% in FY2023 (to 10,331 km from 10,457 km in FY2022)," said Vinay Kumar G, Sector Head, Corporate Ratings, ICRA.
While the government has not provided any reason for the weak performance in highway construction this year, a person aware of the development said disruptions from the Omicron wave and a prolonged monsoon prevented the National Highways Authority of India (NHAI) from completing the targeted 12,000km last year, and the trend seems to be continuing this year.
The government constructed 10,237 km of highways in the pre-pandemic period of FY20 at 28.04 km per day. This increased substantially in the first year of the pandemic when the country saw lockdowns, which indirectly helped speed up construction. That year (FY21), a record 13,327 km of highway were built at 36.51 km per day. In FY22, the pace again slowed down to 10,457 km at 28.64 km per day. This remained slow in FY23 as well with just about 10,331 km of construction.
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