Road construction has slowed, but ₹50,000 crore booster may help – Gudstory

Union Budget for FY24 was approved ₹2.6 trillion to the Ministry of Road Transport and Highways (MoRTH) for road construction. The additional amount will be used to build new roads, pay for previously awarded projects and acquire land.

“The expected capital expenditure (of MoRTH) in 2023-24 and 2024-25 will be 3.11 lakh crore more 3.31 lakh crore. However, from 2025-26 onwards, there will be a further increase in percentage terms,” a ministry spokesperson said in response to a question.

Infrastructure development has a high multiplier effect, and growth is expected to continue in the medium term, supported by favorable policies, strong investor interest and healthy financial profiles.

Better and faster connectivity also appeals to voters.

The Ministry aims to raise funds to meet the planned expenditure. Rs 15,000 crore by monetizing InvITs (Infrastructure Investment Trusts). 6,000 crore by securing future toll revenues, and According to MoRTH, Rs 16,000 crore will be collected through Toll Operate Transfer (ToT) route. The ministry will also seek additional government funds through supplementary demand.

Over 6,217 km of roads have been built in this financial year till December 2023, which is only 45% of the target for the entire year, leaving a huge gap that needs to be filled by the end of March.

In FY23 till December, 5,774 km of roads were constructed.

A road ministry official said construction of more than 50 km per day is expected in the remaining financial year, which will require more funds; Hence the higher capex estimates. Incidentally, 50 km per day is much higher than the all-time high construction level of 36.51 km per day achieved in FY21, mainly due to the Covid-induced lockdown.

Despite the targeted scale of construction and spending, the FY24 target may be missed by a wide margin because, realistically, about 10,000-12,000 km of highways are expected to be built by the end of March.

“It is good that the government is bringing clarity on its capital expenditure plan for building highways,” said Jaganarayan Padmanabhan, senior director at ratings company CRISIL Ltd. However, it may be noted that most of the additional spending proposed may be required in FY24. Especially for highway awards under the HAM (Hybrid Annuity Model) route, a few years back, say, 2015-16 and beyond, for which prompt and higher payments to developers by the government will start now.”

An infrastructure sector expert, speaking on condition of anonymity, said the high expenditure is partly due to the doubling of land prices in a few years and complex access control roads, which need to be built at twice the amount required to build regular highways. More is required.

Road Secretary Anurag Jain had earlier said that when the model code of conduct comes into force, project reports for various highway projects will be completed so that the awards can be substantially increased from about 10,000 km this year.

“Like in the past, highway construction picks up significant pace in the last quarter of the financial year; The same is expected to happen this year too, and the target is expected to be achieved,” said Kushal Kumar Singh, partner, Deloitte India. “The additional funds are expected to be used for land acquisition as well as construction “

The government has increased the highway-building target for the current year to 13,800 km from the earlier 12,500 km as it looks to accelerate infrastructure development ahead of state and central elections in the coming months.

Money to speed up construction, buy land, pay for projects

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Published: 26 January 2024, 11:05 PM IST