Substantial Funds for Roads

State budget announcements for 2016-17

In the recently announced state budgets for 2016-17, several states have increased their focus on infrastructure creation, including the development of roads. States like Andhra Pradesh, Punjab, Madhya Pradesh, Rajasthan and Maharashtra have allocated substantial funds towards road development, with most of them also focusing on fast-pacing rural development activity. In line with the central government’s ideology, states too have sanctioned a considerable share of funds for ongoing projects in addition to launching new ones. One of the new focus areas has been the diversion of stand-alone funds for the maintenance of road assets.

Overall outlays

State-level road development relies heavily on budgetary resources. As part of their respective budgets for 2016-17, 12 states have allocated close to Rs 775 billion for the road sector. During 2016-17, most of these states reported a double-digit increase in allocations for the road sector as compared to 2015-16. Bihar and Rajasthan have allocated the highest amount of funds for the sector. Telangana also has a huge plan outlay, given that it has to catch up with the others. In terms of their share in the total budgetary/plan outlay, Bihar, Punjab, Gujarat and Jharkhand top the list with shares ranging from 9 to 16 per cent. In contrast, Andhra Pradesh, Madhya Pradesh and Maharashtra have shares of less than 5 per cent for the road sector in the total outlay. This is partially attributable to the overall size of the budgetary allocation. Uttar Pradesh has made a provision of Rs 40 billion for the ongoing Agra-Lucknow Expressway project and Rs 15 billion for the newly launched Lucknow-Azamgarh-Ballia Samajwadi Purvanchal Expressway project.

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State highway development focus in Karnataka’s budget

Unlike last year, the Karnataka government in its budget for 2016-17 has decided to invest heavily on capacity augmentation of state highways and major district roads (MDRs). The state government has launched Phase III of the State Highway Development Programme (SHDP) which entails development of 2,795 km of state highways and upgradation of 1,520 km of MDRs at a cost of Rs 35 billion.

A budgetary allocation of Rs 2.62 billion has also been made to facilitate the completion of Phase II of the SHDP. The newly launched projects, costing over Rs 1 billion, include the development of the 48 km Savalanga-Honnali road (Rs 1.3 billion), the 63 km Sindhanur-Kushtagi road (Rs 1.55 billion) and the 40 km Kudligi-Sandur-Torangal road (Rs 1.3 billion). Meanwhile, the Ministry of Road Transport and Highways has approved an expenditure of Rs 24 billion for acquiring land for the upcoming Bengaluru-Mysuru six-laning project.

Kerala to initiate mega road projects

While the road sector’s share in Kerala’s budget has remained roughly the same in the past two years, the actual fund allocation has increased from Rs 9 billion in 2015-16 to over Rs 12 billion in 2016-17. The road sector budget comprises allocations for the Kerala State Transport Project [KSTP] II (Rs 5.22 billion) and a new project for rehabilitating 1,106 km of state highways and MDRs which is likely to attract multilateral funding. The government has also proposed a feasibility study for the development of an elevated expressway between Kasargod and Kovalam. While Phase II of the Seaport Airport road (from Kalamassery NAD junction to Nedumbassery airport) is likely to be completed soon, the state government has sanctioned Rs 1 billion for the preliminary work to be taken up for Phase III of the Rs 3.5 billion project.

In a major development, the state government is planning to initiate 10 mega road projects under the District Flagship Infrastructure Programme (DFIP) during 2016-17. The DFIP envisages the construction of 20 roads in 14 districts at a cost of Rs 27 billion. It is being implemented on a build-operate-transfer (annuity) basis through a loan from the National Bank for Agriculture and Rural Development (NABARD). The construction of the first set of 10 roads will be taken up shortly and is expected to cost of Rs 16.19 billion.

Tamil Nadu’s interim budget to aid execution of ongoing projects

Big-ticket ongoing projects such as the Comprehensive Road Infrastructure Development Programme (CRIDP) and the Tamil Nadu Road Sector Project (TNRSP) have attracted a significant amount of funds.  A sum of Rs 28 billion has been provided in the interim budget for the CRIDP. Since May 2011, the government has reported the completion of work worth Rs 148 billion under the CRIDP. Under this, 5,935 km of state highways, 6,740 km of MDRs and 11,879 km of other district roads (ODRs) have been upgraded.

TNRSP II is being implemented with World Bank assistance at an outlay of Rs 51 billion. Under this project, 12 road works are under implementation at a total outlay of over Rs 26 billion. In the interim budget, Rs 12 billion has been provided for TNRSP II. Meanwhile, the state government is planning to develop an outer ring road (ORR) for Madurai at a cost of Rs 2.13 billion. The project is currently at the tender finalisation stage. Besides, the detailed project report for the Chennai Peripheral Ring Road is under finalisation and the government plans to approach external lending agencies for financing.

Rajasthan reiterates holistic approach towards road development

Rajasthan’s road budget has been spread evenly across most segments like state roads, rural roads and bridges. The state plans to develop 2,000 km of Gramin Gaurav Path roads and missing links in 2016-17. Plans are also under way to construct 4,303 km of roads under the Pradhan Mantri Gram Sadak Yojana (PMGSY) at a cost of Rs 16 billion to connect 1,468 habitations with a population of 250 to 350 people. Besides, renewal of 2,500 km of non-patchable roads at a cost of Rs 6 billion has also been planned.

Construction of 19 road overbridges (RoBs) and two road underbridges (RuBs) at a cost of Rs 7.6 billion will be undertaken. In addition, the state government will also fund the construction of 10 RoBs for the dedicated freight corridor at a cost of over Rs 3 billion. Another Rs 3 billion will be spent on the improvement of national highway sections passing through highly populated areas of the state.

Bridge construction continues to be a key focus area in Gujarat

Gujarat’s budget plans for the road sector highlight the state’s focus on the construction of major bridges. The government plans to develop 43 bridges in the state. These include a four-lane bridge across the Narmada river, a bridge on the Mindhola river near Bardoli, bridges on the Sabarmati and Harnav rivers, a bridge on the Parr river linking Pardi and Valsad talukas, a bridge on the Vadi-Thebi river on the Amreli-Fatehpur road, and a bridge on the Veradi river on the Jamnagar-Lalpur-Porbandar road.

In addition to bridge development, a substantial portion of the state’s budgetary allocations will be diverted towards the Mukhyamantri Gram Sadak Yojana. Plans are also afoot to widen 677 km of state highways and a provision of Rs 2.12 billion has been made for this. Funds have also been sanctioned for ongoing works such as six-laning of the Ahmedabad-Bagodara-Rajkot road and Kh Road in Gandhinagar, as well as four-laning of 59 roads.

Maharashtra launches long-term plan for road sector

In the past year, the state government has launched several big-ticket road projects including the Coastal Road Project, Mumbai-Trans Harbour Link (MTHL), Bandra-Versova Sea Link and the Mumbai-Nagpur Communication Expressway. In its budget for 2016-17, the state has drawn up plans to modernise over 21,000 km of roads during the next eight years. The Maharashtra government has planned an outlay of Rs 40.5 billion for road construction in the current fiscal year.

Greater focus on rural roads in Punjab and Andhra Pradesh

The Punjab government plans to spend about Rs 21 billion on road projects during 2016-17. However, the focus is mainly on strengthening rural roads. For 2016-17, the Andhra Pradesh government has made a provision of Rs 4.29 billion to benefit 215 habitations through construction of 860 km of roads.

Delhi focuses on project commissioning

The Delhi government has laid emphasis on recarpeting of major roads in the city to make them user friendly. As the same time, the government  aims to commission Phase II of the Barapullah elevated corridor during 2016-17. Phase III of the project is likely to be commissioned by December 2017. The state government has made a provision of Rs 4 billion for both phases.

The path forward

The expansive road development plans put forth by the state governments in their budgets have highlighted substantial opportunities for developers, contractors, and material and equipment providers. On paper, Kerala will offer opportunities to private players in the current fiscal year. According to reports, Madhya Pradesh is facing difficulties in the implementation of build-operate-tranfer projects and now plans to implement projects on an engineering, procurement and construction (EPC) basis. Tamil Nadu, Gujarat and Rajasthan will also offer considerable EPC opportunities going ahead.  However, concerted efforts need to be made to ensure their effective implementation. These include capacity building of local contractors and proactive handling of various pre-construction issues.

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