Shubhangi Shukla
Infrastructure Financing Update – July 2023
In this update on the infrastructure sector and its financing in India the central government and the Ministry of Roads, Transport and Highways continued to focus on road and highway infrastructure of the country as one of its key priorities in the context of the general elections next year. Major highways and its related infrastructure projects such as 4-laning, over and under bridges etc are being inaugurated in multiple states where assembly elections are due in the next few months including Rajasthan, Chhattisgarh and Haryana under the Bharatmala Pariyojana leading to impacts like land acquisition, diversion of forest lands, etc . These projects costing thousands of crores are being financed through various means.
The BharatMala Pariyojana launched by the Ministry of Road Transport and Highways (MoRTH) in 2017 aims to build national and economic corridors, border and coastal roads, and expressways, roughly 65000 kms in length and equipped with technology such as CCTVs, SOS booths etc. It also aims to provide 4-lane connectivity to 550 of India’s 766 districts as well as develop 50 economic corridors of about 26,000 km. It remains one of the key infrastructure projects in the present.
According to the government’s estimates, ‘the project will increase the vehicular speed by 20-25%, reduce the supply chain costs by 5-6%, and improve the National Highway (NH) network to carry 70-80% of total road traffic ’.
The first phase of the programme, expected to end in 2027, will develop 34,800 km of highways, at an estimated outlay of INR 10,63,000 crores (revised from Rs 5,35,000 crores last year due to 5 year delay in implementation). 100% FDI in roads and highways is allowed under automatic route.
A slew of roads and highway projects were recently inaugurated in June and July in various states across the country.
Raipur, Chhattisgarh– The Prime Minister inaugurated three national highway projects for the Chhattisgarh section of the six-lane greenfield Raipur-Visakhapatnam corridor on 7th July 2023. The key component of these highways is supposed to be a 2.8-kilometre tunnel with 27 animal passes and 17 monkey canopies. It is claimed that these interventions will ensure unrestricted wildlife movement in the Udanti Wildlife Sanctuary area that the road cuts across.
This dedicated infrastructure has been integrated into many highway development projects across India such as Delhi-Dehradun expressway that runs through Rajaji national park in its last stretch, NH44 section between Nagpur (MH) and Seoni (MP) that passes through the Pench Tiger Reserve and Vadodara Mumbai Expressway Phase II.
Pratapgarh, Rajasthan- 11 National Highway (NH) projects were inaugurated by Union Minister, MoRTH on 4th July 2023 in Rajasthan’s Pratapgarh. They include four National Highways covering 219 km distance and the total cost of the projects is Rs 3,775 crore.
Delhi- Sonipat Highway Flyovers– 11 flyovers on the eight-lane National Highway from Delhi to Panipat were also inaugurated by the Union Minister, MoRTH on 21st June 2023. On the occasion, a grant of Rs. 300 crore under the Setu Bharatam Yojana for the construction of Road Over Bridge (ROB) and Road Under Bridge (RUB) was also announced. The construction of a bypass from Narwana Road to Rohtak Road and a Ring Road from Jind to Ikkas was also announced.
According to the Union Minister work will be done on 100 projects worth Rs 2 lakh crore in Haryana by December 2024. Out of these, 51 projects of 2200 km worth Rs 47,000 crore have been completed whereas, 30 projects of 830 km worth Rs 35,000 crore are in progress. Among 19 other projects of 756 km worth Rs 20,000 crores, a detailed project report of 14 projects is being prepared.
Pratapgarh, Uttar Pradesh (UP)- 5 NH projects worth ₹2,200 crore were inaugurated on 12th June 2023 in Pratapgarh, UP. The widening of a 43-kilometer stretch of National Highway 330 from Pratapgarh to Sultanpur, costing ₹1290 crore, is expected to reduce travel time between Prayagraj and Pratapgarh via Ayodhya. The construction of a proposed 14-kilometer bypass in Pratapgarh, estimated at ₹309 crore, will also commence shortly.
Road safety measures, including the installation of street lights and bus shelters, will also be undertaken on National Highway 31 at a cost of ₹27 crore.
It is hoped that the construction of Pratapgarh-Musafirkhana section will encourage investment and accelerate industrial development in the area.
Deoria, Uttar Pradesh– 5 NH projects worth ₹6,215 crore were also announced for the Deoria region In UP. A 22 km, 4-lane bypass at a cost of 1750 crores in Deoria will be awarded in August, 2023. According to the Union Minister, MoRTH, the backward areas of Deoria and Gorakhpur will benefit from these projects in addition to increased connectivity with Bihar.
Vadodara, Gujarat– 2 new National Highway projects worth Rs 48 crore were inaugurated in Vadodara, Gujarat on 2nd June 2023. One of the projects is expanding the National Highway 48 between Ahmedabad and Vadodara.
The second project costing Rs 17 crore stretches about 1 kilometer near Dena Junction on National Highway 48 in Vadodara. According to the MoRTH, Solar powered street lights have been used on National Highway 48. Polymer Modified Bitumen has been used in the underpass and service road surface which is expected to give it greater strength and better resistance to cracks, he added 3-lane service roads have been integrated in the development.
Mysuru-Nanjangud NH-766– The National Highways Authority of India (NHAI) will take up the six-laning works of the Mysuru-Nanjangud stretch of NH-766 with a change in alignment consequent to the proposed extension of the Mysuru airport runway at a cost of 501 crores. The AAI will transfer the money to NHAI which will pitch in with the balance of money required for completing the works.
Though highway construction costs will be borne by the Center, the State Government will incur a cost of approximately 600 crores to meet the cost of shifting the existing power lines, diverting irrigation canals, shifting water lines, electricity and telephone poles etc. The previous Basavaraj Bommai Government has already released ₹320 crore for the works and the Congress Government has to make an allocation for the balance of the amount.
The government also plans to construct 10,000 km of greenfield expressways at a cost of Rs 4.5 lakh crore as part of the Bharatmala Pariyojana. The National Highways Authority of India has already generated over Rs 70,000 crore through various financing methods, which will be used for highway projects. Projects worth more than ₹2 lakh crore are also being carried out in the northeast region of the country. 670 roadside facilities are being developed along the NHs.
The Union Minister of Road Transport and Highways has reported an increase in the total length of National Highways from 91,287 km in 2013-14 to 1,45,240 km in 2022-23, which is a rise of more than 59%. 4 lane NH has also risen about two times in the same period from 18,371 km which has increased to 44,654 km in 2022-23.
There has been a significant jump in the toll collection according to MoRTH with the credit for it being given to FASTag. The revenues from tolls rose to ₹41,342 crore in 2022-23 from ₹4,770 crore in 2013-14. The government is aiming at increasing the toll revenue to ₹1,30,000 crore by 2030. According to the Union Minister it has also saved approximately ₹70,000 crore in wasted fuel expenses caused by waiting at the toll plazas, according to a research which has not been cited.
The central government aimed to build 12,500 km of roads in the current fiscal year ending March 31, 2024. But with less than 12 months left for the next general election, it is also looking to accelerate the pace of highway construction across the country from approximately 34 kms a day to 40 km per day. A higher pace of construction would likely translate into more than 17 per cent achievement over the annual target of 12500 kms to about 14000 kms. A mix of engineering, procurement, and construction (EPC), hybrid annuity, and build-operate-transfer (BOT) modes to construct roads in 2023–24 is being preferred.
On the subject of NHAI and its fundraising avenues, it was reported that the toll income of the highway builder will ‘comfortably’ meet its debt-servicing requirements. NHAI’s income stood at Rs 41,000 crore in 2022-23 and this will rise to ₹1.25 lakh crore in 2028-29. A bond issue was also launched under the NHAI’s INVIT (Infrastructure Investment Trust) model. Within the first day of its availability on the Mumbai Stock Exchange, the bond reportedly witnessed seven times oversubscription. NHAI INVIT offers an interest rate of 8.05 percent which surpasses traditional bank rates.
MoRTH aims to spend 91 per cent of its budgetary allocation of Rs 2,58,606 crore by December this year. Actual expenditure as of May-end was Rs 59,078 crore. It is also accelerating the process of land acquisition along with highway construction. A total of 170 land acquisition notifications have been issued and compensation of approximately Rs 210 crore has already been processed by the Ministry. Aggressive spending by the ministry is being read as indicative of the highways sector’s capacity to absorb more money in its ecosystem.
Despite the optimism of the road ministry, industry experts and analysts expect a slowdown in the pace of road construction in 2023–24 compared to the previous year.
ICRA Research expects the award of road sector projects to fall by 25 percent in 2023-24 in the run-up to the general elections. So, only around 9,000 km of highways may be awarded in FY24, compared to over 12,000 km in FY23, ICRA said in its report.
Closely linked to logistics, roads and highways, trucks will now need to have air-conditioned driver compartments starting 2025. Shares of Amber Enterprises surged as much as 13% to Rs 2,387 in Tuesday’s trading session, after the announcement by the Union Minister. Amber Enterprises is a prominent solution provider for Heating, Ventilation and Air Conditioning (HVAC) industry.
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