Due to difficulties in obtaining licences for land acquisition during the national elections, highway development in India has drastically slowed down during the last two months. According to data from the Ministry of Road Transport.
Highways, 483 km of new national highways were built in April, and by May 20, another 600 km had been completed. Based on data analysed by Moneycontrol, this is the slowest rate of road construction in the first two months of FY25 since the epidemic. The slowdown can be linked to less land being cleared after the Model Code of Conduct was put into effect and voting started on April 19.
India’s national highway construction is projected to experience a significant slowdown in the coming years, primarily due to a reduction in new project awards and challenges associated with land acquisition and environmental clearances. The Ministry of Road Transport and Highways (MoRTH) has indicated that while the current fiscal year may see targets met or slightly exceeded, sustaining this momentum will be challenging.
Decline in Project Awards
In the fiscal year 2023-24, the awarding of new national highway projects witnessed a notable decline. By the third week of January 2025, approximately 4,100 km of projects had been awarded, a marginal increase from the previous year but significantly lower than the 12,731 km awarded in 2021-22. This downward trend is attributed to government directives limiting fresh approvals under the ‘Bharatmala’ program and the absence of new highway development initiative
Impact of Election-Related Delays
The electoral process in India has also contributed to the deceleration of highway construction. The enforcement of the Model Code of Conduct during election periods restricts the announcement of new projects, leading to delays in project initiation. Additionally, construction companies face labor shortages as workers return to their hometowns to participate in voting, further hindering progress.
Execution Challenges and Land Acquisition Issues
Execution challenges, particularly related to land acquisition and environmental clearances, have exacerbated the slowdown. An inter-ministerial panel has recommended that the MoRTH accept bids only after acquiring 80-90% of the required land and obtaining all necessary statutory clearances. While this approach aims to reduce delays and cost overruns in the long term, it has led to a slower pace in awarding new projects.
Projected Slowdown in Construction Pace
CareEdge Ratings anticipates a 7-10% decline in highway construction in the fiscal year 2024-25, with daily construction rates expected to decrease from 34 km in 2023-24 to approximately 31 km. This projection suggests a total construction of around 11,100 to 11,500 km.
down from 12,350 km in the previous fiscal year. The delays in receiving appointed dates and the increasing complexity of projects contribute to a longer completion cycle, hindering infrastructure development.
Financial Implications and Developer Challenges
The slowdown has financial ramifications for developers and contractors involved in highway projects. A financial analysis of 17 sponsors and EPC contractors engaged in Hybrid Annuity Model (HAM) projects revealed concerns regarding revenue visibility.
While timely execution contributed to a 14% compound annual growth rate in total operating income between FY21 and FY24, lower project awards in FY24 and the first half of FY25 have significantly impacted order book strength. Operating profitability is projected to decline by 200 basis points in FY25 from FY23 levels due to heightened competition.
The convergence of reduced project awards, election-related delays, and execution challenges has led to a deceleration in India’s national highway construction. Addressing these issues requires strategic planning, streamlined approval processes, and effective land acquisition strategies to revitalize the pace of infrastructure development
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