Govt. may double highways sector allocation to INR 45K cr.

The highways sector could see a near doubling of allocation to Rs 45,000 crore as part of the government’s push to infrastructure in the coming budget owing to confidence among planners that quick results can be achieved in this sector if funds are made available.

The Narendra Modi government has managed to award contracts for about 4,000 km of roads of its target of 8,500 km in the current fiscal. The road transport and highways ministry has a target of another 8,500 km for 2015-16.With private sector investment almost drying up in the highways sector, the government has awarded nearly three-fourths of the roads through engineering, procurement and construction (EPC) route. Essentially, the government will have to build roads till the time private sector steps in. “We have asked for a hefty allocation and there is good chance we will get it,” said a ministry official. Experts said that the sector can grow rapidly if funds are made available.

If the issue of money is addressed, the sector can gather pace after the budget, said Manish Agarwal, leader – capital projects and infrastructure at PwC India. He added, though, that the government will also need to tackle other associated issues. “Land acquisition, permissions for rail overbridges, etc., need to be kept ready so that projects can take off,” said Agarwal. The execution of National Highway Development Project (NHDP) slowed down to 3.2 km per day during April-October 2014 from 4.3 km per day in the year-ago period.

Highway Projects

Road transport minister Nitin Gadkari has set a target of constructing 30 km roads per day in the next two years. To achieve this target, the government has proposed to provide funds for projects which are stuck due to cost overruns. There is also a provision for developers to borrow from the National Highways Authority of India (NHAI).

“By the end of current fiscal, India will be able to construct 3,500 km of roads and highways against the target of 5,000 km,” said Anand Kumar, managing director, National Highways & Infrastructure Development Corporation. The larger part of the funds will have to be disbursed by the government in the second year of construction for projects awarded this year, which will also call for an increase in allocation.

Some experts have said that the quality of roads remains an area of concern in this strategy. “In the case of EPC contracts, the quality of the roads constructed has been usually poor as the EPC contractor has no stake in the roads constructed by it, once it is handed over to the government,” a recent study by Crisil and PHD Chamber said.