National highway development has witnessed remarkable progress in the past year. The key priorities have been improving connectivity, alleviating congestion at major nodes, establishing an integrated multimodal transportation system, and promoting sustainable construction. Investor confidence remains high due to a mature policy framework, the uptake of infrastructure investment trusts (InvITs) and a significant project pipeline. Furthermore, the centre has implemented various reforms and measures to resolve long-standing issues. Industry leaders talk about the road sector’s growth and performance, key challenges, emerging trends and future needs…
What has been the progress in the road and highway sector over the past year?
Gaurav Chandna
The construction of national highways in India has increased steadily over the past decade, growing 1.6 times from 91,287 km in 2014 to 146,145 km in 2023. The quality of the highway network has also improved, with four-lane national highways increasing 2.5 times, from 18,387 km in 2014 to 46,179 km in 2023. The government’s strong commitment to infrastructure development is highlighted by the significant increase in project awards after Covid-19, particularly during 2021-22 and 2022-23. However, award activity slowed in 2023-24 due to national elections and delays in approving revised cost estimates for Bharatmala Pariyojana Phase I projects. We expect new project awards to pick up this year with the conclusion of elections and a continued higher budget allocation to the road ministry.
Sudhir Hoshing
India has significantly improved its highway infrastructure over the past decade, with the expansion of the national highway network from 70,000 km to over 140,000 km, development of world-class expressways and launch of the Bharatmala Pariyojana project. Technological integration has been achieved through the implementation of FASTag and intelligent traffic management systems. Further, safety has been improved with better designed overpasses and improved road markings. Public-private partnerships (PPPs) have increased private sector participation in highway construction and maintenance. The government has increased its budget for road and highway development, focusing on sustainability initiatives. Rural connectivity has been improved through the Pradhan Mantri Gram Sadak Yojana, while international connectivity has been improved through highways connecting India to neighbouring countries.
Pawan Kant
The government’s dedication to infrastructure advancement is evident in the substantial budgetary increase for the Ministry of Road Transport and Highways (MoRTH), which rose to Rs 2.7 trillion, a 25 per cent increase over the revised estimates for 2022-23. In 2023-24, MoRTH constructed over 12,000 km of national highways, marking the second-highest achievement to date. In addition, 46 national highway stretches, totalling 2,612 km, were earmarked for monetisation and MoRTH successfully met over 90 per cent of its monetisation target of Rs 440 billion for the year.
At Interise, we have also achieved a significant milestone by acquiring four road projects with an enterprise value of $1 billion.
These accomplishments and steps taken by the industry reflect a dynamic and forward-thinking approach to enhancing India’s road infrastructure, fostering long-term economic growth and development.
Shrinath Rao
In 2023-24, road construction in India reached 12,349 km, marking a 20 per cent increase over the previous year, and the second-highest after the 13,327 km constructed in 2020-21. Lane augmentation reached a record 9,642 km, up 17 per cent from 8,233 km in 2022-23. The pace of national highway construction increased to 33.8 km per day from 28.3 km per day in the previous year. However, project awards decreased to 8,581 km from 12,376 km in 2022-23. Projects have been awarded in the hybrid annuity model (HAM) and engineering, procurement and construction (EPC) modes for some time, but the government recently reintroduced the build-operate-transfer (BOT) model. India continues to explore innovative financing strategies, including the toll-operate-transfer (TOT) model and InvITs, to attract private investment and accelerate infrastructure development. Additionally, 100 per cent FDI in roads and highways is permitted under the automatic route.
What has been the impact of the government’s recent initiatives?
Gaurav Chandna
As part of its strategy to improve transportation infrastructure across the country, the government has planned several initiatives to develop the road network. A key initiative has been the renewal of the BOT toll model. The National Highways Authority of India (NHAI) has primarily awarded highway construction projects under the EPC and HAM model over the past few years. To meet its construction targets, NHAI has recently relaunched the BOT toll model. It has already identified a pipeline of 65 projects with a total project cost of Rs 2.5 trillion under the BOT toll model. The success of this model will ultimately depend on the revenue-generating potential of the projects offered to concessionaires. A long-term concession tenure under the BOT toll model will also ensure quality construction and proper upkeep of the projects.
Under the government’s National Monetisation Pipeline, NHAI continues to monetise operational road assets through the toll-operate-transfer model and sales to its Infrastructure Investment Trust. These proceeds will be redeployed by NHAI towards new road construction. In addition, asset recycling by private developers is expected to continue as the government tenders new projects for construction. The pipeline of operating assets from NHAI as well as private developers presents large-scale investment opportunities for infrastructure investors.
There has been a focus on the development of expressways. Access-controlled expressways allow for unhindered flow of traffic without traffic signals and intersections, facilitating high speed movement of vehicles. Under the Vision 2047 master plan, a total of 50,000 km of access-controlled expressways are proposed to be built across India, ensuring that any location is within 100-125 km of an expressway. Such a network of expressways across the country will enable the efficient, high speed movement of passengers and cargo, thereby reducing logistics costs.
Further, as part of its efforts to elevate highway infrastructure standards and user experience, NHAI has taken several initiatives including separate tenders for wayside amenities, and rolling out updated standards for advanced traffic management systems for enhanced road safety. Recently, NHAI also invited expressions of interest from companies to develop and implement a GNSS-based electronic toll collection system in India. This will provide a seamless and barrier-free tolling experience for road users and enhance the efficiency of toll operations. Such initiatives will significantly improve the experience for road users across the country.
Sudhir Hoshing
The Indian government’s recent highway development initiatives have significantly impacted the country’s economy, society and environment. This has led to economic growth, enhanced connectivity, improved safety, environmental impact, regional development, social impact, economic corridors and clusters, tourism growth, enhanced national security and infrastructure modernisation. Improved highways have facilitated faster movement of goods and services, attracted investment and created millions of jobs. They have also improved urban-rural integration, reduced travel time and decreased accidents. Green construction practices have reduced the environmental impact of highway projects, and smoother traffic flow has led to lower vehicular emissions. These initiatives have promoted balanced regional development, reduced disparities and spurred urbanisation and migration. The creation of economic corridors and industrial clusters along major highways has led to industrial growth and supply chain efficiency. The improved road connectivity has also boosted the tourism industry, promoting domestic tourism and cultural exchange. The improved strategic connectivity and disaster management capabilities of highways have strengthened national security. Overall, these impacts contribute to India’s long-term economic growth, social progress and environmental sustainability.
Pawan Kant
Over the past five years, NHAI has made significant strides in infrastructure development, driven by the Bharatmala Pariyojana. By March 2024, NHAI awarded 26,425 km and constructed 17,411 km of roads, with a total expenditure of Rs 4.59 trillion. The authority also launched five expressways and 22 access-controlled highways, spanning 9,860 km. NHAI proactively engaged with the industry to relook at and modify the model concession agreements under TOT and BOT. These efforts mark a transformative era for infrastructure development, laying a strong foundation for long-term economic growth and improved national connectivity.
Shrinath Rao
Various key government initiatives have made a significant impact on the road sector. The model concession agreement for BOT projects has been revised to attract more private participation. Provisions for accepting insurance surety bonds and e-bank guarantees as bid and performance securities have been incorporated into standard documents for EPC, HAM and BOT toll projects. Significant employment opportunities are being created, with Bharatmala Phase I alone expected to generate 142 million man-days of work. India continues to invest heavily in road infrastructure, with a focus on expanding and modernising the road network. PPPs have been actively used to attract private sector investment.
The implementation of digital platforms for project monitoring, land acquisition and electronic toll collection has increased transparency and efficiency. In line with this, the PM Gati Shakti programme aims to integrate various infrastructure schemes across ministries and states including Bharatmala, Sagarmala, inland waterways, dry/land ports, UDAN scheme, etc. Economic zones such as textile clusters, pharmaceutical clusters, defence corridors, electronic parks, industrial corridors, fishing clusters and Agricultural zones will also be covered to improve connectivity and make Indian businesses more competitive.
Safety remains a priority, with increased road safety audits and efforts to identify and rectify blackspots. For instance, around 32,971 km was audited till 2019-20, and an additional length of 40,000 km was targeted for auditing by 2023-24. Additionally, blackspots were identified for removal and rectification as a permanent measure to reduce road accidents.
Rural connectivity is being enhanced to promote economic development and improve the quality of life in rural areas. FASTag has been implemented for electronic toll collection on national highways. NHAI is now moving towards GPS-based toll collection and removing toll booths. Initiatives have also been taken to develop charging infrastructure along highways to support the growing adoption of electric vehicles (EVs) and alleviate range anxiety.
Currently, roads and highways account for approximately 60 per cent of India’s cargo movement. This improved mobility provided by the expanding network of highways and expressways is spearheading change and will help lower logistics costs.
What are the emerging trends in the asset management and operations and maintenance (O&M) space? What are the key sustainability initiatives?
Gaurav Chandna
Over the years, as the industry has matured, this sector has seen participation from multiple investor categories – infrastructure developers, private equity funds, fund platforms and InvITs. Increased participation by long-term hold-to-maturity investors, such as InvITs, has resulted in the adoption of an asset management approach for O&M. This entails life cycle-based planning, the adoption of proactive maintenance strategies to minimise defects, and the adoption of environmental, health and safety practices in line with global standards. These are driven by a combination of NHAI-mandated concession obligations and improved economics for concessionaires.
Some of the key sustainability initiatives are the use of recycled materials for highway construction, such as fly ash, plastic waste, recycled asphalt and recycled aggregates; the installation of solar panels for toll plazas and highway lighting; and plantation on highway medians and avenues.
Sudhir Hoshing
India’s highway asset management and O&M sector is witnessing several emerging trends driven by efficiency, sustainability and technological advancements. Key trends include digitalisation, smart infrastructure, PPPs, predictive maintenance, big data analytics, road safety and innovative financing models. Digital traffic management systems, internet of things (IoT) and sensors, and digital twin technology are being deployed for real-time monitoring and asset management. HAM is gaining traction for long-term O&M, balancing risk between the government and private players. Big data analytics is used for predictive maintenance and asset condition monitoring. Road safety is a priority, with automated toll collection systems and enhanced road safety measures. Innovative financing models include InvITs and TOT.
Key sustainability initiatives include recycling of waste materials, energy efficiency improvements, adoption of renewable energy, water conservation, biodiversity preservation, carbon footprint reduction and waste management. These initiatives ensure that India’s growing highway network supports economic growth while also aligning with global sustainability goals. Overall, these emerging trends and sustainability efforts reflect a shift towards more intelligent, efficient and environmentally responsible highway asset management.
Pawan Kant
As traffic volumes on highways rise, effective and sustainable O&M practices are crucial for preventing pavement deterioration and maintaining infrastructure functionality. With limited control over revenue, maintenance is a key area where value can be added for both investors and road users.
At Interise, we are leading the charge in institutionalising asset management. As the first self-sponsored InvIT in India, we are signalling a shift towards independent and professionally managed InvITs. The past few years have been transformative for us. We have focused on adopting best practices to elevate our asset management standards.
We are proud to have achieved six ISO certifications, in quality management, environmental management, risk management, occupational health and safety, information security, and road traffic management systems. These certifications reflect our commitment to excellence and efficiency.
Digitalisation is a cornerstone of our strategy. From recording road defects to completing work and processing vendor payments, we leverage SAP and advanced asset management applications to maximise operational efficiency. We partner with leading technical institutions to research alternative and sustainable materials, ensuring long-term, impactful solutions.
As part of our commitment to sustainability, we have taken significant steps to measure, monitor and reduce our carbon footprint. In 2023-24, we enhanced our renewable energy use and improved energy efficiency by installing 1,070 kW of solar rooftop systems and transitioning to LED lighting, which resulted in an approximately 21 per cent reduction in Scope 2 emissions.
Looking ahead to 2024-25, we plan to install EV charging stations, focus on fleet decarbonisation and adopt sustainable materials. In addition, we are dedicated to preserving biodiversity through extensive native plantings, which not only enhance the aesthetics of our projects but also play a crucial role in carbon sequestration. We are encouraging regional contractors to adopt equipment and practices that produce lower carbon emissions.
These initiatives underscore our ongoing commitment to environmental stewardship and sustainable development, paving the way for a greener future.
Shrinath Rao
With a fair amount of the road network already constructed, there is a need to upgrade and maintain it. The implementation of intelligent transportation systems (ITS), smart traffic lights, remote monitoring, predictive maintenance through data analytics and predictive modelling are improving the efficiency of maintenance activities. Geographic information systems (GIS) are being used to create comprehensive asset databases, to efficiently manage road infrastructure assets. Other technologies pertaining to road safety solutions, environmental monitoring, communication systems and energy efficiency are being used to reduce energy consumption and maintenance costs. The growing emphasis on sustainable development has led to the adoption of various techniques, practices and materials in road construction that aim to minimise the environmental impact, improve longevity and reduce resource consumption. Some of the initiatives being implemented are the reuse of aggregates, adoption of innovative mixing techniques for various pavement layers, use of geosynthetics, permeable pavements, fly ash and slag, stabilisation techniques, energy-efficient techniques, innovative designs, and the incorporation of natural vegetation and landscaping.
What are some of the key challenges?
Gaurav Chandna
Delays in land acquisition and right-of-way (RoW) approvals have been key factors impacting project execution timelines. The cost of land acquisition has also increased with the pace of development. The new BOT concession mandates 90 per cent RoW to be secured as a prerequisite before the appointed date, a key factor for the successful implementation of the BOT toll model.
Competitive intensity in the sector has increased over the past three to four years due to increased developer interest and NHAI relaxing some of the qualification requirements. While this is positive for price discovery and expanding the ecosystem, the ability of new entrants/contractors to achieve timely financial closure and ensure quality construction remains crucial.
Sudhir Hoshing
The asset management and O&M of highways in India face several challenges, including high capital requirements, uncertain revenue streams and payment delays. Technological integration and implementation also pose difficulties due to a lack of standardisation and data management issues. Infrastructure quality and durability are also some of the concerns, with poor construction quality and ageing infrastructure leading to faster deterioration and higher maintenance costs. Environmental and social challenges include environmental degradation, climate resilience and community displacement.
Operational challenges include traffic management, road safety and coordination among stakeholders. Legal and regulatory hurdles include navigating a complex regulatory environment and resolving disputes. Balancing development with sustainability is crucial, as is implementing green technologies and managing waste. Apart from this, there are skilled labour shortages and capacity building challenges.
Public perception and engagement present significant challenges, with local communities often opposing highway projects due to environmental concerns and a lack of public awareness. To overcome these challenges, a multifaceted approach is needed, including securing adequate funding, embracing technological innovation, ensuring high quality construction and maintenance practices, and balancing development with environmental sustainability. Collaborative efforts among the government, private sector and communities are essential for overcoming these hurdles and ensuring the long-term success of highway asset management and O&M in India.
Pawan Kant
India’s infrastructure landscape is evolving rapidly, with around 150 HAM projects lined up for monetisation, reflecting a robust pipeline of expressways and national highways. However, the pace of monetisation may be impacted due to unresolved issues such as financing approvals, sponsor-related challenges and client approval processes for change in control. Also, to hasten the deal closure process, new financial and insurance instruments, such as warranties and indemnities, could be explored.
Infrastructure funding is heavily reliant on banks. To diversify funding sources, there is a need to provide an impetus to domestic institutions and retail investors to invest more in InvITs, widening the investment base and supporting infrastructure development.
In addition, there is significant untapped potential in monetising state road assets. Developing targeted policies for the monetisation of these assets could unlock substantial opportunities and attract private investment.
The expanding road network and other transport modes require insightful assessments to ascertain traffic circulation across networks. Delays in receiving target traffic extensions and resolving long-pending issues will undermine investor confidence.
The National Monetisation Pipeline includes projects offered through the TOT model. A transparent process, such as declaring the initial estimated concession value and conducting detailed technical evaluations through competent consultants – of which there is a dearth – can help expedite monetisation.
In conclusion, addressing these challenges and seizing these opportunities will be crucial for sustaining growth and enhancing investment in India’s infrastructure sector. By tackling these issues proactively, we can ensure a more robust and efficient infrastructure development framework for the future.
Shrinath Rao
Obtaining adequate funding for road infrastructure projects remains a challenge. While public funds are often insufficient, private sector participation can be hindered by issues such as land acquisition hurdles, regulatory complexities and uncertainties in revenue generation. Acquiring land for road projects, especially in densely populated areas, can be a lengthy and complicated process. These issues can lead to project delays, cost escalation, and sometimes, local opposition. Delays in project implementation are common due to factors like bureaucratic red tape, land acquisition disputes, environmental clearances, and unforeseen challenges during construction. Road projects can have environmental impacts, including deforestation, habitat disruption and increased pollution. Balancing infrastructure development with environmental preservation is a challenge that requires careful planning and mitigation measures. Many existing roads require regular maintenance and repairs. Adequate maintenance is essential to ensure road safety, efficiency and longevity, but resource constraints and operational challenges can hinder effective maintenance practices. Additionally, ensuring the quality of road construction is crucial for longevity and safety. However, there have been instances of using substandard construction practices and materials.
While there have been advancements in ITS, the seamless integration of technology for traffic management, toll collection and data analysis still requires ongoing efforts and investments. Developing skilled manpower and technical expertise in road construction, maintenance and management is vital for achieving high quality infrastructure and efficient operations.
There are disparities in road infrastructure development between urban and rural areas, as well as among different states and regions, which pose significant challenges. Furthermore, streamlining regulatory processes, ensuring consistency in policies, and creating an enabling environment for private sector participation remain important challenges.
What is the sector outlook for the next one to two years?
Gaurav Chandna
The sector will continue to demonstrate robust growth going forward, given the strong project pipeline and continued budgetary support from the government. A stable and predictable regulatory environment will ensure that domestic and international capital continues to flow into the sector, helping build quality road network infrastructure in the country.
Sudhir Hoshing
India’s highway sector is expected to witness significant growth and transformation over the next one to two years. Key trends include strong government support, technological advancements and a focus on sustainability. The government is committed to expanding and upgrading the national highway network, with programmes like the Bharatmala Pariyojana driving infrastructure construction. PPPs are expected to attract private investment into the sector. Major projects under the Bharatmala Pariyojana will focus on enhancing regional connectivity, particularly in remote and rural areas.
Technological advancements include the integration of smart technologies, digitalisation of operations and a focus on sustainability and green infrastructure. The sector will also focus on using sustainable materials and construction techniques, as well as building climate-resilient highways. Financial innovations and investment include the growth of InvITs and diversification of funding sources. However, operational challenges such as land acquisition and regulatory delays, economic uncertainty, and increased competition among contractors will impact the sector.
The government will prioritise the development of highways that enhance connectivity between major economic hubs and rural and remote areas, facilitating trade, reducing logistics costs, and supporting economic growth. Despite challenges related to funding, land acquisition and economic uncertainty, the sector is expected to continue its expansion and modernisation, playing a crucial role in India’s economic development.
Pawan Kant
India is set to maintain its impressive construction pace, with approximately 13,000 km of new roads expected to be built in 2024-25. Road Transport Minister Nitin Gadkari has set an ambitious target of constructing over 35 km of roads per day in the current fiscal year.
Looking ahead, a pipeline of 33 projects, totalling 2,700 km and valued at Rs 600 billion according to ICRA, has been identified for monetisation in 2024-25. These projects will be monetised through a combination of NHAI’s InvIT and the TOT model, offering significant opportunities for investment and development. The sector will also witness the adoption of newer tools and technologies, such as IoT and AI, to enhance process efficiency. Greater and more willing adoption of ESG (environmental, social and governance) practices will create an environment of trust and alignment among various stakeholders. Overall, I see roads as corridors of prosperity and growth.
Shrinath Rao
Under the Bharatmala Pariyojana, of the total planned length of 34,800 km, around 26,425 km has been awarded, with the programme expected to be completed by 2027-28. In the BOT space, projects with an estimated cost of Rs 2 trillion are expected to be awarded in the coming financial years. In addition, expressways with an estimated cost of Rs 2 trillion are expected to be awarded in the next few years. Vision 2047, a key government initiative, aims to provide equity, efficiency and strategic connectivity to meet five key objectives. These are providing access to high speed corridors within 100-150 km of all citizens, positioning India among the top 10 G20 countries for high speed corridor density, providing equitable access to national highways in under developed regions, improving passenger experience with world-class passenger amenities, and reducing logistics costs as a share of GDP. The master plan for national highways is being developed in line with this vision, reflecting a positive sector outlook.