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The Union budget for FY24 had granted ₹2.6 trillion for the ministry of road transport and highways (MoRTH) for road construction. The additional amount will be used to build new roads, pay for projects awarded earlier, and acquire land.
“The likely capex (of MoRTH) in 2023-24 and 2024-25 would be ₹3.11 lakh crore and ₹3.31 lakh crore. However, from 2025-26, it will further rise in percentage terms,” a ministry spokesperson said in response to a query.
Infrastructure development has a high multiplier effect, and the growth is expected to sustain over the medium term, supported by conducive policies, strong investor interest and healthy financial profiles.
Better and faster connectivity also resonates well with voters.
To meet the planned expenditure, the ministry aims to raise ₹15,000 crore by monetizing InvITs (infrastructure investment trusts), ₹6,000 crore by securitizing future toll revenue, and ₹16,000 crore from the toll operate transfer (ToT) route, according to MoRTH. The ministry will also seek additional government funds through a supplementary demand.
More than 6,217 km of roads have been built this fiscal up to December 2023, which is just 45% of the target for the full year, leaving a big gap that needs to be filled by the end of March.
In FY23, 5,774km of roads were built till December.
A road ministry official said construction of over 50km per day is expected in the rest of the fiscal year, which will require more funds; hence the higher capex projections. Incidentally, 50 km per day is much higher than even the all-time high construction level of 36.51 km per day achieved in FY21, thanks largely due to covid-induced lockdowns.
Despite the targeted scale of construction and spending, the target for FY24 may be missed by a big margin as, realistically, just about 10,000–12,000km of highways is expected to be built by March end.
“It is good that the government is bringing clarity over its capex plan for building highways,” said Jagannarayan Padmanabhan, senior director at ratings company Crisil Ltd. “However, it may be noted that most of the additional spending proposed in FY24 may be required for highway awards particularly under the HAM (hybrid annuity model) route, done a few years back, say, in 2015-16 and later, for which accelerated and higher payment to developers by the government will begin now.”
An infrastructure sector expert said on the condition of anonymity that the higher spending is partly due to land prices doubling in a few years, and complex access control roads that need over double the amount needed to build regular highways.
Road secretary Anurag Jain had said earlier that when the election code of conduct kicks in, project reports for various highway projects will be completed so that awards can be enhanced substantially from about 10,000km this year.
“As in the past, highway construction gathers significant pace in the last quarter of the fiscal year; the same is expected this year also, and the target is expected to be achieved,” said Kushal Kumar Singh, partner, Deloitte India. “The additional money is expected to be utilized in land acquisition as well as construction.”
The government has upwardly revised highway-building target for the current year to 13,800km from the earlier 12,500km as it looks to fast-track infrastructure development ahead of state and central polls in coming months.
Money to speed up construction, buy land, pay for projects
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Published: 26 Jan 2024, 11:05 PM IST
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