The road sector has witnessed a turnaround in the past three years. National highway projects covering about 34,000 km were awarded between 2014-15 and 2016-17, almost double the length awarded in the preceding three fiscal years. Meanwhile, around 20,000 km of national highways were constructed during 2014-15 to 2016-17. The current construction rate of national highways is about 18 km per day.
The launch of innovative implementation models such as the hybrid annuity model (HAM) has contributed significantly to the increase in activity. So far, about 36 projects worth Rs 327 billion have been awarded under HAM. In addition, expressway development has also gained momentum with 10 expressway projects presently at various stages of implementation.
The Ministry of Road Transport and Highways (MoRTH) on its part has taken concrete steps to ease the operating and financing environment for the sector. Initiatives such as amendments to the model concession agreement (MCA), a one-time fund infusion, an exit policy, premium deferment, rationalised compensation to developers, and securitisation of cash flows in build-operate-transfer projects have benefitted stakeholders. As a result, the implementation of about 90 per cent of the projects that had been languishing has been put back on track.
The pace of road development in the Northeast has also picked up. As of August 2017, National Highways and Infrastructure Development Corporation Limited (NHIDCL) has been involved in the implementation of 220-225 projects, spanning over 11,000 km, with a total civil cost of over Rs 11 trillion. Of these, around 105 projects have been awarded or are currently under implementation. State-wise, Arunachal Pradesh accounts for the highest number of projects being undertaken by NHIDCL, followed by Assam and Manipur. The government has also identified 2,000 km of coastal roads to improve connectivity between ports and remote villages.
On the financing front, the government is changing the way it channelises funds, with the emergence of new funding avenues. Long-term sources of financing are now being tapped. The launch of the toll-operate-transfer (TOT) model to monetise the existing asset base is one such step. Initially, nine projects have been put on the block.
The MoRTH recently listed rupee-denominated masala bonds worth Rs 70 billion on the London Stock Exchange. India’s maiden sovereign wealth fund, the National Investment and Infrastructure Fund has also identified the first batch of road projects for funding. Players such as IRB Infrastructure Developers, MEP Infrastructure Developers and Reliance Infrastructure have initiated the process of listing their assets under infrastructure investment trusts (InvITs).
Asset sales are also gaining prominence with players like IL&FS Transportation Networks Limited (ITNL), Hindustan Construction Company (HCC), NCC Limited, Sadbhav Infrastructure Project Limited (SIPL), the GMR Group and Gammon India offloading stakes in operational as well as under-construction projects. On the buyers’ side, several global investors are eyeing revenue-generating assets in India. Developers such as ITNL, SIPL, HCC, and Ashoka Buildcon have also refinanced debt to reduce costs.
Meanwhile, a few players are also taking the initial public offering (IPO) route to raise funds. Since 2015, six key IPOs have been launched. These include the offers by Dilip Buildcon, the IRB InvIT Fund, PNC Infratech, MEP Infrastructure Developers and SIPL. The MoRTH is also planning an IPO for the National Highways Authority of India (NHAI) in 2018.
Meanwhile, technological advancements continue to draw the ministry’s attention. FASTag penetration has increased to 371 toll plazas with the sale of over 350,000 tags as of March 2017. The Indian Bridge Management System has been developed to monitor the inventory of national highway bridges. Online platforms like e-Pace, Infracon, and INAM-PRO+ (an updated version of INAM-PRO) have also been launched.
The MoRTH is encouraging the use of new materials and techniques. It has issued specifications for the use of micro-surfacing, polymer/rubber modified bitumen and fly ash-based cement to ensure cost-effective and durable road construction and maintenance. The road safety agenda has attracted greater attention with the passage of the Motor Vehicles (Amendment) Bill, 2017, which will address the issue of road safety by enforcing stiffer penalties.
Even though NHAI has decided against inviting bids for a project till land has been acquired, land acquisition remains a grey area. Delays in obtaining statutory clearances, non-availability of soil/aggregates, utility shifting, and lengthy arbitration processes are areas which still need attention. The NHAI has also created a new highway operations division, which will focus on all non-commercial operational activities for efficient network utilisation and to provide hassle-free services.
Going forward, the MoRTH targets the construction of about 15,000 km of national highways during 2017-18. Plans are also in place to award 50,000 km of projects worth Rs 5 trillion in the next two years. Mega projects such as Bharat Mala, Setu Bharatam, Char Dham Connectivity and the development of economic corridors, are also likely to provide significant opportunity in the sector.
