National Highways execution to decline by 7-10 per cent in FY25

The pace of construction for National Highways in India witnessed an uptick in FY24, reaching 34 Km/day, albeit lower than the 37 km/day reported in FY21.

However, execution challenges and increasing project complexities are expected to pull down the pace of construction by 7-10 per cent in FY25, dropping to around 31 Km/day.

This would result in a decline in National Highways Construction from 12,350 Km in FY24 to 11,100-11,500 Km in FY25.

The report highlights heightened competition and increased project complexities as key factors contributing to this slowdown.

Despite the government's commitment to infrastructure development, FY24 saw a notable decrease in project awards, down by 31 per cent compared to the previous fiscal year.

This decline was more severe than anticipated, primarily due to pending approvals of revised costs from the cabinet for projects under Bharatmala Pariyojana.

Legislative elections and subsequent imposition of the code of conduct further contributed to the reduction in project awards.

BOT-HAM (Hybrid Annuity Model) remained the preferred mode of award, constituting around 55 per cent of the total projects awarded during FY21-FY24.

However, significant delays have been observed in the execution of such projects.

Approximately one-third of the projects awarded after March 2020, amounting to Rs 1.50 lakh crore, are facing delays ranging from 4-6 months beyond the grace period of three months.

Another significant portion of NH-HAM projects, with an aggregate Bid Project Cost (BPC) value of Rs.40,000 crore as of April 1, are still awaiting the issuance of the appointed date for more than a year.

The announcement of greenfield expressways and highways has aggravated challenges towards land acquisition, leading to elongated receipt of the appointed date.

Additionally, the uniform execution span of two years for projects, irrespective of their scope, has contributed to project delays.

These factors have increased the project completion cycle to around 3.50-4 years, resulting in a subdued execution pace in the sector.

To address challenges, the Ministry of Roads Transport and Highways (MoRTH) has revamped BOT Toll concessions.

CareEdge Ratings anticipates a shift in awarding preference from EPC to HAM and Toll projects in the medium term, with a significant reduction in the share of EPC projects to around 25-30 per cent in awards going forward.

This shift is expected to reduce the funding requirement for NHAI while focusing on the quality of construction. (ANI)