Interim Budget hikes road ministry's allocation by 3% to Rs 2.78 lakh crore

The government had set a target of 13,000 km and 13,800 km of highway construction in 2022-23 and 2023-24, but the speed of construction was affected by unfavourable weather conditions and elections in many states.

The ministry is likely to complete the construction of 11,000 km of national highways this financial year after constructing 10,993 km of highways in FY23, according to officials from MoRTH.

Even though the budget speech itself didn’t mention a broad allocation towards PM Gati Shakti, the government allocated Rs 11.1 lakh crore as capital expenditure for the next fiscal year.

This is a rise of 11.1 percent when compared to 2023-24's budget estimate of Rs 10 lakh crore.

Out of the total Rs 2.78 lakh crore, the National Highways Authority of India (NHAI) has been allocated around Rs 1.68 lakh crore as part of MoRTH’s capital expenditure plan for 2024-25, a 3.9 percent increase from 2023-24, when it was allocated Rs 1.62 lakh crore.

As per the revised estimates of the government, the NHAI will spend around Rs 1.674 lakh crore in 2023-24.

The rise in budgetary allocation to the NHAI is in line with the government’s strategy to recapitalise its balance sheet with higher budgetary support and zero market borrowings.

According to the interim budget for 2024-25, no provision for borrowings by the highway developer has been made for the next financial year. However, the NHAI's budgetary allocation has been increased to Rs 1.68 lakh crore, 3.9 percent higher than the budget estimate of Rs 1.62 lakh crore made in the previous budget and Rs 1.41 lakh crore in 2022-23.

This is the third straight year when the NHAI's market borrowing has been set as negligible. In 2022-23, the government had asked the highway developer to limit its borrowings. In the Budget 2022-23, the government had projected that NHAI’s IEBR would fall to around Rs 1 lakh, from Rs 65,000 crore  in 2021-22.

As per the government's revised estimates, the NHAI will spend no money as IEBR in 2023-24. IEBR comprises funds by way of profits, loans, and equity.

NHAI’s debt stood at Rs 3.44 lakh crore at the end of January 2022, as against Rs 24,188 crore in 2014-15, a 14-fold rise in less than seven years. The government is now looking to reduce its debt to Rs 1 lakh crore by 2024-25.

MoRTH and NHAI have missed their national highway construction targets in six of the past 10 years and are likely to miss them in FY24 as well.

However, the pace of expansion of national highways under the current government has increased significantly compared to road building during the previous governments, although the United Progressive Alliance (UPA) government was more focussed on the construction of rural roads.

The building of national highways peaked during the pandemic-hit FY21, when lockdowns helped accelerate construction, touching an all-time high of 37 km a day, leading to a record 13,327 km of highways being built.

The road ministry had planned to construct 14,600 km of highways at 40 km a day in FY22. The goal was lowered to 12,000 km and eventually, 10,457 km of roads were built.

In FY23, the target was set for 12,500 km, even though Road Transport and Highways Minister Nitin Gadkari had suggested that 18,000 km of highway construction at a daily rate of 50 km could be considered.