The road sector has delivered a commendable performance through 18 months of Covid-related disruptions, and it should improve as India heads towards normalisation. There has been momentum, despite labour shortages during lockdowns, and a paradoxical situation where the demand for steel, bitumen, cement, equipment, etc. has contracted, but prices have risen due to supply chain disruptions and a quick global recovery pushing up fuel and metal prices.
Road building has hit around 37 km per day despite the hurdles. The National Highways Authority of India’s (NHAI) focus on expressways, for example, seems to be working reasonably. However, there have been delays and cost escalations in the Bharatmala Pariyojana.
Low interest rates and proactive sector policy have enabled financial inflows. The asset monetisation plan has raised about Rs 170 billion. But it has the potential to raise Rs 1.6 trillion if it finds takers for all targeted assets. The InvITs concept has attracted financing, including overseas capital. Quite a few private road developers have also managed to deleverage their balance sheets.
The HAM model has mixed results so far but the government has reworked the terms of the MCA to try and address issues such as slow land acquisition and weak sponsors, who struggle in terms of finding financial closure. It remains to be seen what further tweaks will be necessary to ensure uptake since the Bharatmala Pariyojana envisages that about 60 per cent of projects will be awarded via HAM. The current tender award methodologies may need a review, for instance, and a more realistic assessment of the financial capacity of concessionaires may be required.
As herd immunity develops due to vaccinations and economic activity picks up, supply disruptions should ease, though high global prices could feed inflation. Demand for many types of equipment, and for materials such as cement, steel, bitumen and plastic waste is bound to rise too.
The pace of land acquisition has to accelerate, alongside the induction of more technology to improve efficiencies in civil engineering components, as well as in the management of toll collection and traffic handling. All the stakeholders seem to be focused on this aspect, with developers and policy-makers trying to implement a common data environment and adopting tolling-related solutions, such as intelligent transit management systems, pay-as-you-use tolling, hybrid tolling, and integration of FASTag with e-way bills.
The involvement of the Indian Institute of Technology Madras in this process is a positive signal since it could lead to many payoffs down the line. The establishment of a chain of electric vehicle charging stations across the highway network is also a good investment in a lower-carbon future.
Improving the efficiency of the movement of goods and people across all 550 districts through the national highway network will require bridging critical gaps. Once the Bharatmala Pariyojana is done, about 50 per cent of the national highway network, amounting to about 70,000 km, will have four-lane, or better, infrastructure. This would mean a vast improvement in the Logistics Performance Index.