MC Exclusive: Road Ministry asks for 25% hike in budget allocations as NHAI borrowings remain muted

Officials also expect that approvals of the revised Bharatmata Phase-l programme will likely come in by 2024-25, which will help boost the pace of project awarding and construction in the next financial year

The Ministry of Road Transport and Highways of India has asked the Ministry of Finance for a budgetary allocation of Rs 3.25 lakh crore for the financial year 2024-25, which is 25 percent higher on-year, as the government is looking continue keeping the National Highways Authority of India's market borrowings at a minimum in the next financial year, several government officials told Moneycontrol.

"As part of the government’s strategy to recapitalise its (NHAI) balance sheet with higher budgetary support and zero market borrowings, we have asked for a 20-25 percent jump in Budget allocation needed in 2024-25," a senior government official said.

He added that after a relatively muted year, in terms of project awarding, due to state elections and the upcoming Lok Sabha elections, the government plans to significantly increase awarding projects in 2024-25, which will in turn boost capital expenditure outlay next year.

"NHAI is likely to complete 2023-24 will market borrowing of less than Rs 1,000 crore for the second straight year and going forward its market borrowing is expected to remain less than Rs 1,000 crore for 2024-25 as well, after which its total debt will be in a comfortable spot," a second government official said.

The government has set the NHAI's internal and extra-budgetary resources (IEBR) as negligible in 2023-24, indicating the NHAI will not look to borrow money to fund its capital expenditure.

The current financial year was the second straight year when the NHAI's market borrowing has been set as negligible under the Union Budget, and officials expect the NHAI's market borrowing to remain at a minimum in 2024-25 as well.

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 NHAI’s debt to Rs 1 lakh crore by 2024-25.

Officials also expect that approvals of the revised Bharatmata Phase-l programme will likely come in by 2024-25, which will help boost the pace of project awarding and construction in the next financial year.

Awarding projects under the Bharatmala Pariyojana scheme has slowed down in the last few months after the Comptroller and Auditor General (CAG) of India found instances of irregularities in the awarding of projects in August.

In its report on the implementation of Phase-I of Bharatmala Pariyojana, the auditor has found deficiencies in the appraisal and approval mechanism proposed to the Cabinet Committee on Economic Affairs (CCEA) and also flagged huge cost overruns in many of the high-cost Engineering Procurement and Construction (EPC) projects, including the construction of the Dwarka Expressway project and Delhi-Vadodara Expressway.

"Investors looking at the (roads) sector will eye 2024-25 as the year to set the pace of growth for the next five years, and after a slower-than-expected performance in the current financial year, the ministry is looking to boost both its construction and awarding target next years," the second government official said.

MoRTH expects to spend around Rs 1.85 lakh crore as capital expenditure by December 2023, senior officials told Moneycontrol last week.

The ministry, which was earlier planning to spend over 90 percent of its Rs 2.59 lakh crore capex allocation for the financial year 2023-24 by December 2023, has seen a dramatic slowdown in awarding of projects since July due to heavy rains, delays in land allocation and elections in five states, officials said.

So far in 2023, till October 31, MoRTH has spent around Rs 1,66,157 crore as capex and constructed around 4,450 km of national highways but has awarded projects for only 2,595 km.

In the same period last year, the government constructed around 4,060 km of national highways and awarded projects for 5,007 km.

Officials said that a slowdown in land allocation due to elections and delayed and prolonged monsoons in parts of the country have thrown a spanner in the ministry's plans.

"Despite a shorter time frame for awarding projects in 2023-24, we expect to surpass the road construction target of 12,500 km set last year," another government official had told Moneycontrol.

ICRA forecasts a 16-21 percent on-year increase in road execution activity to 12,000-12,500 km in FY24, compared with the government’s target of 14,000 km. The Centre constructed about 10,993 km of national highways in FY23, missing its target of 12,500 km.

The ministry has missed its highway construction target for the past two years.

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 has initially planned to construct 14,600 km of highways at 40 km per 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 at 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.

MoRTH had received a push with the Union Budget raising the allocation by 36 percent to around Rs 2.7 lakh crore for 2023-24.

Out of the total Rs 2.7 lakh crore, the NHAI has been allocated around Rs 1.62 lakh crore as part of MoRTH’s capital expenditure plan for 2023-24, a 21 percent increase compared to 2022-2023, when it was allocated Rs 1.34 lakh crore.

Higher budgetary allocations were necessary to help the ministry meet the 25,000-km road development target announced by the government in the 2022-23 budget, amidst rising interest expenses and increasing land acquisition costs.

The National Highways Authority of India (NHAI) and National Highways and Infrastructure Development Corporation Ltd (NHIDCL) are primarily responsible for the construction of national highways and expressways in India.