2024-03-31 15:50:20
Despite a brisk pace of road construction during fiscal year 2023-24, the Ministry of Road Transport and Highways is likely to miss its target. It may end FY24 with constructing only 94 per cent of the targeted 13,814 km of national highways (NH).
Moreover, awarding of NH projects also declined year-on-year during April to February in FY24 due to delayed approval of the revised proposal for phase 1 of the Bharatmala Pariyojana (BMP) road development scheme.
The ministry’s target includes award of around 10,000 km of NH projects and construction of 12,000-13,000 km of highways in FY24. However, market watchers point out that construction and awarding will be subdued until at least July this year, and may pick up following the culmination of the Lok Sabha elections.
Vinay Kumar G, Vice President and Sector Head-Corporate Ratings of the rating agency ICRA, says the ministry’s execution improved by 13 per cent Y-o-Y to 9,088 km in 11 months of FY24, backed by higher spending. Overall execution for FY24 is expected to increase by 11-16 per cent to 11,500–12,000 km.
Awarding of NH projects during 11 months of FY24 declined by around 35 per cent Y-o-Y to 4,872 km.
“ICRA expects the awards to decline to 6,000–6,500 km in FY24, compared to 12,375 km in FY23, due to the delay in the approval of revised cost estimates for BMP and the muted awarding in Q4 FY24 with the model code of conduct in place ahead of the general elections,” he says.
He believes the ministry is likely to award NH projects of 10,000-10,500 km in FY25 post the elections.
“Given the adequate order-book of road developers and the continued push for infrastructure development from the government, the pace of road construction is expected to remain strong at 12,000-12,500 km in FY25,” he says.
Sankar Subrahmaniyam, co-founder of InCoBAN, an infra-construction improvement ecosystem, says the ministry has adopted a prudent approach, prioritising quality and execution capability over quantity, and introduced the right measures in the project award process. This is a positive development despite the shortfall in meeting the target, he says.
“It is crucial to acknowledge that merely meeting contractual obligations and targets should not be a measure of progress. If contracts are awarded to incompetent parties, the quality of work suffers, leading to temporary results and a loss to the exchequer,” he explains.
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