On a Strong Footing: NHDP continues its impressive award and construction performance

NHDP continues its impressive award and construction performance

Launched in 1999, the National Highways Development Programme (NHDP) envisaged the development of around 50,000 km of national highways over a period of 15-16 years. However, by 2017 it was realised that the NHDP had reached a certain level of maturity and a need was felt to redefine road development to ensure a macro approach while planning the expansion of the national highways network. With this in view, the government launched the ambitious Bharatmala Pariyojana in Oct-ober 2017, under which the remaining 10,000 km of NHDP road works were subsumed.

During the year 2017-18, there was a quantum jump in award and construction activity under the NHDP. Further, the launch of Bharatmala provided an impetus to the daily construction rate.

In addition, the Ministry of Road Transport and Highways (MoRTH) has taken several steps to expedite national highway projects. The National Highways Authority of India (NHAI) is also exploring unconventional methods of raising funds such as the equity funding model (under this model, projects are auctioned before they are built).

The award scenario        

With the Bharatmala Pariyojana, tendering and awarding of projects have also picked up pace. The new procedure for sanctioning projects was put in place in November 2017. Under the new protocol, the NHAI board was granted full powers for sanctioning engineering, procurement and construction (EPC) projects. Following this, the high-powered Projects Appraisal Committee and the Cost Committee were put in place under NHAI.

In 2017-18, the authority awarded 150 road projects spanning 7,400 km and worth Rs 1,220 billion. An average of 2,860 km of road projects was awarded by NHAI in the past five years (2012-13 to 2016-17), with 4,335 km being awarded in 2016-17. Therefore, in comparison, the length of projects awarded in 2017-18 is an all-time high since NHAI’s inception in 1995. During the first half of 2018-19, around 478 km of national highway projects have been awarded under the NHDP.

An analysis of the mode of implementation reveals that 51 per cent of the projects were awarded on an EPC basis, followed by the hybrid annuity model (HAM) with a share of 46 per cent. The awarded EPC projects span a total length of 3,791 km and will be implemented at a cost of Rs 430 billion. Further, 3,396 km was awarded on a HAM basis at a cost of Rs 765 billion and 209 km on the toll model at a cost of Rs 25 billion.

In terms of project location, in 2017-18, the maximum number of projects were awarded in Uttar Pradesh (13), followed by seven each in Rajasthan, Odisha, Gujarat and Karnataka. In terms of investment, Uttar Pradesh topped the list with Rs 185.55 billion worth of projects being awarded, followed by Karnataka at Rs 92.47 billion and Rajasthan at Rs 74.43 billion.

Of the projects awarded under the NHDP during 2017-18, the six-laning of the 99.87 km Hapur bypass-Moradabad section including the Hapur bypass from km 50 to km 148.28 of National Highway (NH)-24 was the most cost-intensive project entailing an investment of

Rs 34 billion. It was followed by the Rs 32.16 billion Lucknow-Sultanpur four-laning project and the Rs 29.92 billion Mallasandra-Karadi four-laning project.

During 2017-18, NHAI successfully awarded 74 per cent of the targeted length, signalling a major turnaround from the 2016-17 award performance, wherein it managed to meet only 29 per cent of its award target.

 Increase in construction rate

In 2017-18, 3,071 km of national highways were constructed under the NHDP. It represents a 16.85 per cent growth over the previous year, during which 2,628 km was constructed. This improvement comes on account of a pickup in the daily construction rate from 6.5 km per day in 2016-17 to 8.42 km per day in 2017-18. As of September 2018, 333 projects spanning 10,946 km are currently under implementation across the country. The total estimated cost of these projects is Rs 2,887.44 billion.

Expressway development also gained momentum during the year. One of the major developments was the commissioning of India’s first green expressway – the Eastern Peripheral Expressway – and an 8.36 km stretch of the Delhi-Meerut Expressway, both in May 2018.

Encouraging signs

With proactive policy interventions such as a one-time fund infusion, rationalised compensation, harmonious substitution, etc., around 88 per cent of the stalled projects have been put back on track, or have been appropriately re-engineered and restructured. Further, there has been a pick-up in financial closures especially for HAM-based projects. According to India Infrastructure Research, between May 2014 and October 9, 2018, 34 road projects have achieved financial closure, with the majority of these being implemented under HAM. In 2018-19, so far, 10 road projects worth around Rs 135 billion have achieved financial closure. All these projects are being implemented through HAM.

In August 2018, NHAI signed an MoU with the State Bank of India for an unsecured loan worth Rs 250 billion. The loan will be provided for a period of 10 years with a three-year moratorium on repayments. It is the largest one-stroke loan to have been sanctioned to NHAI by any institution. This move is a deviation from the authority’s traditional borrowing methods of raising resources through long-term bonds issued to various investors (including the Life Insurance Corporation (LIC), the Employees’ Provident Fund Organisation and other qualified investors), tax-free bonds and masala bonds. Further, LIC has also bought bonds worth Rs 20 billion in the first issuance of NHAI’s 30-year bonds in 2018-19.

NHAI is also planning to buy back 20 national highway and 19 state highway projects spanning 3,160 km from private players. While the total cost of the 20 national highway projects is estimated to be at least Rs 82 billion, the cost of the state highway projects is yet to be worked out. This policy is expected to reap benefits for the road sector by adequately addressing the financial concerns of concessionaires and allowing them to have adequate capital to invest in upcoming projects.

To expedite highway construction, the MoRTH has preponed the completion date for 300 national highway projects, to March 2019 from the earlier scheduled date of June 2019. Of these, 127 are NHAI projects while the remaining are under the ambit of the MoRTH.

The road ahead

The MoRTH has fixed a target of awarding works for around 20,000 km of national highways during 2018-19. This is about 25 per cent more than the 17,055 km awarded during 2017-18, of which 8,652 km was awarded by the MoRTH; 7,397 by NHAI and 1,006 by National Highways and Infrastructure Development Corporation Limited (NHIDCL). Further, the construction target for 2018-19 has been set at 16,420 km, of which 9,700 km will be constructed by MoRTH, 6,000 km by NHAI and 720 km by NHIDCL. The per day construction target has been set at 45 km for the current year, against last year’s approximately 27 km per day. Of the 408 projects which NHAI has targeted for award during 2018-19, the maximum number of projects is likely to be awarded to Maharashtra (50), followed by Uttar Pradesh (45) and Rajasthan (28). Therefore, the overall outlook for the road sector remains optimistic as the government has been successful in infusing the required momentum in both award and construction activities.