Why more road projects were awarded in FY16: Care Ratings

Efforts taken by National Highways Authority of India (NHAI) to address bottlenecks have resulted in more new projects being awarded during FY16, finds a report by Care Ratings. It adds that the initiatives have also resulted in higher execution of these projects.

"With renewed thrust on infrastructure, road projects are gathering momentum as reflected by an increase in the award of projects in terms of length by 42 percent during FY16 vis-à-vis FY15," it stated.

The projects that were awarded during FY16 after adjusting for cancellations were around 4,368 km in comparison to 3,250 km in FY12. 

The pace of of construction for NHAI projects has also increased from 4.11 km a day during FY15 to 5.51 km a day during FY16. Furthermore, projects where construction work is yet to start, reduced from 7,145 km (105 projects) as on March 31, 2016 to 4,635 km (83 projects) as on May 31, 2016. The report says a lot of factors helped improve the tally of projects being awarded. Upfront land acquisition and clearance from the Ministry of Environment, Forest and Climate Change (MoEF) and increasing proportion of EPC (engineering, procurement and construction) contracts led to this increase.A key initiative was the adoption of Hybrid Annuity Model (HAM) for road projects -- under this model the government pays 40 percent of the total cost in the first five years through annual payments. This model has seen increased participation from many developers as risk-reward is favourable.