Road transport ministry likely to spend Rs 1.85 lakh crore as capex by Dec 2023

The ministry, which was earlier planning to spend over 90 percent of its Rs 2.59 lakh crore capex allocation for 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.

The Ministry of Road Transport and Highways (MoRTH) expects to spend around Rs 1.85 lakh crore as capital expenditure by December 2023, senior officials told Moneycontrol this week.

The ministry, which was earlier planning to spend over 90 percent of its Rs 2.59 lakh crore capex allocation for 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.

The government has set a road construction target of 12,500 km for FY23 and was allocated Rs 2.57 lakh crore as capital expenditure outlay in the Union Budget for 2023-24.

“At the current scaled-down pace of capital expenditure (outlay), the plan is to spend Rs 1.85 lakh crore on projects before December and push for higher capex spends in January and February before the model code of conduct kicks in," one of the officials said.

He added that despite the slow pace of project-awarding and capex outlay in the past few months, the government is confident of surpassing both the road construction target and capex outlay for 2022-23.

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.

"lf the target for the award has to be met this year, decisions on the approval of the revised Bharatmata Phase-l or alternative programme needs to be taken expeditiously. A shortfall in awards this year will reflect in the progress of construction in 2024-25," a second official said.

Target for 2023, delays in awarding projects

The second official added 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," a second official said.

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.

Elections and model code of conduct

Buoyed by the rise in the pace of construction in the first quarter, the Centre had increased the highway-building target for this year to 14,000 km but that goal was lowered to 12,000 km in August.

Experts had expected the pace of construction and awarding of projects to slow down in the quarter ending March 2024, with general elections scheduled by May 2024, as government agencies cannot award new projects after the model code of conduct kicks in ahead of the general election.

The model code of conduct is enforced from the day the Election Commission of India announces the election schedule and is operational till the process is completed.

The code of conduct for political parties and candidates is a set of dos and don’ts framed with the consensus of political parties.

According to this code, the government cannot announce any financial grants in any form or promises thereof; or lay foundation stones of projects or schemes of any kind; or make any promise of construction of roads, provision of drinking water facilities or make any ad-hoc appointments in Government, Public Undertakings.

ICRA Research expects the award of road projects to fall by 30 percent in FY24 in the run-up to the general elections. About 9,000 km of highways may be awarded in FY24, compared to over 12,000 km in FY23, ICRA said.

The expected decline is similar to the trend ahead of the 2019 general elections, when about 5,500 km of road projects were awarded, compared with over 7,000 km in 2018, ICRA said.

Target for FY23 missed

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.

Budget 2023-24

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.

This is a nearly 10 percent jump over the budgetary allocation of Rs 1.99 lakh crore made in the budget for 2022-23.

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.