Expansion Drive: Sector steps on the pedal

The road sector has persistently withstood the economy’s challenges and the blow from the pandemic. With award and construction moving at a fast pace, the sector has exhibited strong performance. Investor confidence conti­nues to be high due to a number of factors su­ch as conducive and mature policy frame­wo­r­ks, presence of new investment vehicles (such as infrastructure investment trusts), investor-friendly regulatory measures and a healthy pipeline of projects.

Initiatives such as the PM Gati Shakti Yo­jana and Bharatmala Pariyojana have contributed significantly to the expansion of the sector. The focus on sustainable construction, road safety and green highways has grown in recent years. As a result of government measu­res to reduce the carbon footprint, more and more green construction materials are being adopted. In addition, the government vigorously promotes the ap­­­plication of soil stabilisation ag­e­nts. The Mi­nistry of Road Transport and Highways (MoRTH) is advocating the use of more sustainable fuels as the government moves towards stricter pollution norms and promotes electric vehicles.

Policy

MCA amendments announced

• The MoRTH approved changes to the model concession agreement (MCA) for toll projects un­der the build-operate-transfer (BOT) mode that will allow ownership transfer after one year of commercial operations.
• The lowest bid project cost will be the sole criterion for bid evaluation under the new co­n­ditions in hybrid annuity model (HAM) projects. This differs from previous HAM bids in which operations and maintenance (O&M) costs were also a bid parameter.

Budgetary allocation sees 68 per cent hike

• Budget outlay towards the roads and highways sector rose 68.5 per cent to Rs 1.99 trillion in financial year 2022-23 from Rs 1.18 trillion (budget estimate for 21-21) in financial year 2021-22. The budget of the government-run National Highways Authority of In­dia (NHAI) is expected to increase by 133 per cent to Rs 1.34 trillion in the current fiscal year, up from Rs 573.5 billion (budget es­ti­mate 2021-22) in financial year 2021-22.

Mandate for the use of 25 per cent precast

• The central government has mandated the use of pre-cast concrete elements for at le­ast 25 per cent of the total concrete volume in specific construction projects. This aims to re­duce pollution at construction sites while also expediting work completion and improving aesthetics.

Other regulatory developments

• In February 2022, the MoRTH reinstated the re­q­ui­rement of earnest money deposit and ot­h­er relaxations, for example, per­forma­nce ba­nk guarantee increase is ex­pec­ted to be re­mo­ved in the near term. This is expected to reduce the competitive intensity to some extent.

Asset monetisation via TOT

The toll-operate-transfer (TOT) segment has witnessed a number of developments. A total of four TOT transactions have taken place in the road sector till now, raising around Rs 170 billion and entailing road assets spanning over 1,400 km. Post TOT-V auctions, most bundles have been kept smaller in size to attract more domestic capital.

• Sekura Roads emerged as the highest bidder for the TOT bundle VI (which spans 108.1 km), and TOT-X (which spans 125 km) with fi­nancial bids of Rs 11.07 billion and Rs 17.11 billion respectively. TOT-VI, however, has been annulled while TOT bundle X is yet to be awarded.
• The Indian Highway Concessions Trust won TOT-VII (135 km), the Eastern Peripheral Exp­re­ss­way of NCR, with a financial bid of Rs 62.67 billion.
• TOT bundle VIII which spans 138 km has been annulled after receiving financial bids of Rs 13.14 billion by the highest bidder, Path Highways.
• The National Investment and Infrastructure Trust has bid Rs 30.11 billion for the 72 km long TOT bundle IX and it is currently under consideration.

Bharatmala: Award and construction picking pace

The year 2021-22 witnessed consistent project award activity with 6,306 km (highest length awarded by NHAI in the past three years) of len­gth awarded and 4,325 km of length constructed (higher than the 4,218 km in financial year 2020-21 and 3,979 km in financial year 2019-20). The momentum continued in 2022-23 (till July) with 1,975 km awarded as against 2,434 km awarded in the corresponding period of 2021-22. Similarly, 2,493 km was constructed during the April-July period of 2022-23 vis-à-vis 2,927 km constructed in the corresponding period of 2021-22.

The government stands firm on its vision to develop 22 expressways by 2025. Key project highlights include award of 597 km of road len­gth of the Delhi-Katra Expressway to KCC Buil­d­­­con Private Limited, CDS Infra Projects Limi­ted, Ceigall India Limited, a joint venture (JV) of Shiv Build India and Mehta Construc­tion, and a JV of Evrascon and MKC Infrastruc­ture Limited. The Shirsad-Alkoli eight-lane road stretch, which is a part of the Vadodara-Mum­bai Expre­ss­way project, was awarded to APCO Infratech Private Limited.

In a notable development, NHAI in collaboration with Rajpath Infracon Private Limited and Jagdish Kadam set a Guinness World Re­co­rd for the longest continuous stretch of an as­p­halt/ bituminous concrete road. The single-lane road was constructed on the NH-53 section bet­ween Amravati and Akola in Maharashtra. The 75 km road was completed in 105 hours and 33 minutes. The construction began on Ju­ne 3 at 7:27 a.m. and ended on June 7 at 5 p.m.

PNC Infratech Limited has been certified for creating the highest quantity of bituminous mix laid and the longest length of flexible pavement (DBM Course) in 100 hours.

At the state level, significant progress was made with respect to project award and completion. Uttar Pradesh spearheaded the activity.

Some of the key project awards are:

• In June 2022, ITD Cementation bagged pac­kages X, XI and XII of the Ganga Expressway project while H.G. Infra Engineering Limited secured packages IV, V and VI of the same project. In December 2021, the 594 km Ga­n­ga Expressway, the longest in the country connecting Meerut and Prayagraj, was aw­arded to the Adani Group and IRB Infrastruc­ture.
•  In May 2022, the JV of KBM Enterprises and M/s Kampung Kamyer Trading Company won the Borkhat-Sonapur road upgradation project while in April 2022, Prakash Asphal­ti­ngs & Toll Highways (India) Limited won a con­tract worth Rs 11.36 billion for the Pukh­rayan-Ghatampur-Bindaki road project.

Some of the key project completions are:

• In November 2021, the 340 km long Pur­va­n­chal Expressway, with seven main brid­g­es, se­ven railway overbridges, 114 minor bri­d­ges, and 271 underpasses, was inaugurated.
• The Bundelkhand Expressway, which conn­e­cts Chitrakoot in the underdeveloped Bun­de­lkhand region with the Lucknow-Agra Exp­re­ssway near Etawah, was inaugurated in July 2022.
• In December 2021, the Odi­sha government inaugurated the Gopinathpur Bridge pro­j­ect in Odisha with a 3.4 km long T-shaped bridge over the Mahanadi river.
• Some of the other projects which were inaugurated during the past 12-15 months in­clude the Digha-AN Sinha Institute stretch, Dispur-down town-last gate two-lane flyover project and the Bahadurpura flyover.

Financial closures

The financing scenario in the road sector has improved considerably in the past few years. With the emergence of various alternative me­ans of funding, the market has become more flexible towards the road sector. Around 16 HAM projects worth Rs 230 billion were able to ac­hieve financial closure during the past 12-15 months (till July 2022). Some of the special purpose vehicles (SPV) for which loans were tied up include Dhrol Bhadra Highways, Ircon Ludhiana Rupnagar, Raipur-Visakhapatnam-CG-Highways and Patel Vadodara Kim Express­way Private Limited.

Other major developments

• In July 2021, the IRB Infrastructure Trust su­c­cessfully closed fundraising by way of a ri­g­h­ts issue of units amounting to Rs 3.81 billion from the existing unit holders.
• In November 2021, NHAI created the se­cond public sector-sponsored infrastructure in­ve­st­ment trust (InvIT), which has already raised over Rs 80 billion and has marquee inves­tors including CPP Investments and the On­tario Teachers’ Pension Plan Board (OTPPB). It currently holds five toll road ass­ets stretching to 390 km.

FASTag collection

• FASTag penetration grew from approximately 16 per cent in 2017-18 to 96.3 per cent in 2021-22. The overall toll collection during 2017-18 was Rs 219 billion including Rs 35 bi­llion earned through FASTag. However, in 2021-22, toll collection using FASTags su­rged substantially. While the overall toll coll­ec­tion was Rs 345 billion, the toll collected through FASTag amounted to Rs 332 billion. In order to facilitate seamless payment and vehicle mo­vement on national highways, toll plazas will soon be replaced by a GPS-based toll system that will serve in place of the pre­sent FASTag. The funds will be collected th­rou­gh GPS imaging (on vehicles).

Intelligent traffic management system

• As of August 2022, the delayed installation of an intelligent traffic management system (ITMS) on the Mumbai-Pune Express­way has re­­sumed. The country’s first ITMS network was inaugurated in December 2021 on the 135 km long Eastern Peri­phe­ral Ex­pre­ssway.