12,500-13,000 KM Road To Be Constructed In Current Fiscal Year With 5-8 Per Cent Growth Despite Elections, Icra Forecasts

Rating agency Icra has forecasted a 5-8 per cent growth in road execution in India for the current fiscal year, expecting it to reach 12,500-13,000 km.

This is despite the fact that India will be under Model Code of Conduct for months due to general elections. The expected growth follows a significant 20 per cent expansion in 2023-24.

The agency attributes the anticipated growth to a healthy project pipeline, increased government capital outlay, and the Ministry of Road Transport and Highways' (MoRTH) focus on project completion, as per a report by The Economic Times.

Icra highlighted that road execution faced challenges in the first half of financial year 2024 (FY24) due to prolonged monsoons in certain regions, leading to fewer productive days. Despite this, the ministry's project award pipeline remains robust, standing at over 45,000 km as of March 2024.

However, project awarding was significantly affected in FY24 due to delays in Cabinet approval for revised cost estimates of Bharatmala Pariyojana Phase 1 (BMP).

As a result, overall awards decreased by 31 per cent to 8,551 km in FY24 from 12,375 km in FY23.

This decline in awards before general elections is not unprecedented, as a similar trend was observed in FY19, with project awarding dropping by over 67 per cent year-on-year.

Icra noted that the engineering, procurement and construction (EPC) mode continues to dominate the awards process, accounting for 70-75 per cent of awards in FY24, followed by build, operate, transfer (BOT)-Hybrid Annuity Mode (HAM), with a 25-30 per cent share.

Notably, there were no awards under BOT-Toll in FY24.

Additionally, in March 2024, the ministry amended the BOT-Toll model concession agreement to enhance its attractiveness.