Govt to fall short on FY23 target despite revving up highway construction during Jan-Feb

In a last-ditch effort to chase the target to construct 12,000 km of national highway in 2022-23, the government boosted highway construction in January and February, according to the data from the Ministry of Road Transport and Highways (MoRTH).

Around 1,030 km and 1,260 km of national highway were constructed in January and February, respectively, at a run rate of 33.25 km/day and 45 km/day, respectively.

Collectively 8,064 km of national highways have been constructed in 2022-23 till February, which would make it nearly impossible for the government to meet its target of 12,000 km by the end of March.

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In the Budget for 2021-22, the government had set a target of 25,000 km of highway construction in 2022-2023 and 2023-24. Out of the above 12,000 km was expected to be completed in the first year and 13,000 km in the second year.

The government's ambitious target to construct 25,000 km in two years was based on 13,327 km of highways that were built in 2020-21 despite COVID-19-related disruptions.

However, the national highway construction in 2022-23 has been higher when compared to 2021-22, during which 8,045 km of highways were made by the end of February. In the full year of 2021-22, 10,457 km of highways were constructed.

The improved pace follows measures taken by MoRTH to undertake a comprehensive review aimed at speeding up the construction of national highway projects.

According to the data, the ministry is focusing on fast land acquisition to expedite the execution of many highway projects. MoRTH issued a total of 197 land acquisition notifications in February, in which it paid Rs 451 crore as compensation for land.

During the month, 59 projects spanning a length of over 1700 km with a capital outlay of Rs 55,322 crore were also appraised by the ministry’s standing finance committee.

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Government officials had said that heavy rains had dampened highway creation in the first half, which is being offset now. Contractual issues also slowed highway construction during that period.

The pace of road projects awarded in 2022-23 has also been lower than in 2021-22, with 7,497 km of highway projects being awarded in 2022-23 so far, 121 km lower than 2021-22.

The slowdown in highway construction seen in the last two years has been in line with the government looking to reduce the debt of NHAI.

For the past two years, the government has set NHAI's internal and extra-budgetary resources (IEBR) as negligible, indicating the body will not look to borrow money to fund its capital expenditure.

In 2022-2023, the government asked the highway developer to limit its borrowings. In the 2022-23 budget, the government 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, NHAI will spend Rs 798 crore as IEBR in 2022-23. IEBR comprises funds by way of profits, loans and equity.

Similarly in the Budget for 2023-24 the government set the NHAI's IEBR as negligible.

NHAI’s debt fell below Rs 3.4 lakh crore at the end of September 2022. The government is now looking to reduce this to Rs 1 lakh crore by 2024-25.

"With the NHAI handcuffed to borrow money there has been a fall in the pace of awarding project hybrid annuity model (HAM) and engineering procurement and construction (EPC) projects," a senior official from a road construction major said.

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He added despite the fall in project awarding seen in the last two years, expectations were that the NHAI will increase project awarding in 2023-24 to meet its targets.

Roads constructed in India currently are built more on the HAM and EPC routes in which government pays 40 percent and 100 percent of the project cost, respectively, to the concessionaire.

In the case of BOT projects, the government or NHAI does not pay for the construction cost, with the developer recouping investments by collecting toll on the stretch for the entire concession period, typically 20-30 years.