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Business News/ News / India/  Road building remains an uphill task
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Road building remains an uphill task

Road construction stood at 523 km in April and jumped to 1465 km in May, before slumping to 263 km in June.

An ICRA Research report said road project awards may decline by a sharp 25% in FY24 in the run-up to general elections next year, which usually sees squeezing of awards in the last quarter. (Mint)Premium
An ICRA Research report said road project awards may decline by a sharp 25% in FY24 in the run-up to general elections next year, which usually sees squeezing of awards in the last quarter. (Mint)

New Delhi: India’s pace of road building slowed in the June quarter, road ministry data showed, at a time the government is looking to raise the annual construction target ahead of a series of elections this year and next.

According to the data, only 16% or about 2,250 km of the annual target of 14,000 km was built in the first quarter, which typically sees a pickup in construction continuing from increased pace in the March quarter.

Road construction stood at 523 km in April and jumped to 1465 km in May, before slumping to 263 km in June.

Though the Q1 figure is 14% higher than 1966 km built in the same quarter last year, the slower pickup ahead of monsoon months, when construction slows anyway, makes it harder to achieve the FY24 target of building 40km a day. Besides, last year’s numbers were a drop of 14% over the previous year, lowering the base.

This year’s target of 14,000 km will be the highest in a year -- increased from a modest 12,500 km target set at the beginning of the year, despite missing targets in the last two years. In FY22, against a revised target of 12,000 km, only 10,457 km of highways were built. Similarly, in FY23, against a target of 12,500 km, just about 10,993 km of highways were constructed.

“Typically, projects take 9-12 months to receive the appointed date, which usually happens towards the fag end of a fiscal. Construction was muted last fiscal when the pace of construction declined 14% on-year to 1,966 km in the first quarter as input prices cascaded to procurement delays and slackened average daily construction.

This fiscal, construction is expected to pick up after the monsoon to 11,500-12,500 km for the full fiscal, which translates to average daily construction of 32-34 km. For the remainder of the year, therefore, the average pace of construction is likely to be 34-37 km per day," a CRISIL analytics report on the road sector said.

“While that would be a sharp improvement over last fiscal, speed-breakers may keep the government from meeting its target of constructing 45 km of roads per day," the report said.

Besides, slowing highway awards could deplete the project pipeline, slowing construction further. In Q1, just 611 km of highways were awarded, as against 969 km last year. With awards taking 9-12 months to reach construction stage, the last quarter of this year could see a decline in construction.

An ICRA Research report said road project awards may decline by a sharp 25% in FY24 in the run-up to general elections next year, which usually sees squeezing of awards in the last quarter. So, only around 9000 km of highways may be awarded in FY24, against over 12,000 km in FY23. The expected decline is similar to the trend seen ahead of 2019 general elections, when awards fell even sharper from over 17,000 km in 2018 to just about 5,500 km in 2019. According to SBICAPS, its important to ramp up construction pace given the significant award pipeline, with NHAI alone yet to award 43,000 km.

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 10,993 km of construction. This year, the internal target is to construct highways at a pace of 45 km per day, but a realistic target is similar to the ones set in previous two years of around 12,500 km of highway construction in FY24, which is now being revised to 14,000 km.

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Published: 20 Jul 2023, 11:24 PM IST
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