Road building races, may falter later

A total of about 1,465 km roads were laid in May against 523 km in April. This is the first time road building has touched the 50km per day mark.

The heightened construction pace assumes importance as the government is expected to showcase better connectivity and infrastructure as it seeks a fresh mandate.

Speed has picked up after a protracted slowdown when construction activity fell despite more road project awards. In FY23, the pace was 28.3 km/day, and the fiscal ended with 10,331 km of new highways against a target of 12,500 km. The previous year was similar as well: 10,457 km at 28.64 km a day, against a target of 12,200 km.

“Road execution improved by 12% to 1,465 km for May 2023 as compared to 1307 km during the similar period last year. Given the healthy unexecuted order book of awards, increased budget outlay of 25% in FY2024 budget for MoRTH, continued relaxations in terms of monthly payments and lower retention amount requirements, ICRA expects the execution to increase by 16-21% to 12,000-12,500 km (33-34 km/day) in FY24," said Vinay Kumar G., vice-president & sector head - corporate ratings, ICRA Ltd.

However, while construction picked up, project awards slowed to 382 km in May 2023 against 496 km a year earlier.

It is expected that road construction will maintain the robust pace in June as well, before it drops in the following months as monsoon sets in.

Though the government and highway builders are upbeat about the construction pace, experts say work may suffer in the fourth quarter that would come close to the 2024 general elections, when construction typically slows down.

ICRA Research expects the award of road sector projects to fall a sharp 25% in FY24 in the run-up to general elections. So, only around 9,000 km of highways may be awarded in FY24, as against an award of over 12,000 km of highway in FY23, it said. The expected decline is similar to the 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.

Along with the decline in awards, elections may also slow down construction, though the hope is that work on road projects may be speeded up post-monsoon in the third quarter to make up for any loss in the last quarter. 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 was 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. For FY24, 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 12,000 km of highway construction in FY24.