The roads and highways sector remains the backbone of India’s infrastructure growth. While execution challenges persist, the highway network has continued to expand. Various government initiatives have reaffirmed the long-term vision for integrated connectivity. At the same time, rapid advances in technology and a stronger focus on sustainability are reshaping the way projects are constructed. Amid these dynamic developments, industry experts deliberate on the sector’s performance, the monetisation outlook and the trends that will shape the next phase of road development…
How would you assess the performance of the road sector over the past year? What have been some of the noteworthy developments?
Sanjeev Gupta
The past year has been somewhat of a mixed bag for India’s highway sector. While the overall momentum remains strong, there has been a marginal slowdown compared to the previous year, with about a 15 per cent dip in new project awards. This was largely due to cancellations or postponements of bids by key agencies such as the National Highways Authority of India (NHAI), National Highways and Infrastructure Development Corporation Limited and the Ministry of Road Transport and Highways (MoRTH), often because of delays in state-level clearances.
That said, the sector has also witnessed some remarkable achievements. In FY2025, NHAI recorded its highest-ever annual expenditure on highway development, touching nearly Rs 2.5 trillion and surpassing its set target. Highway construction, too, outperformed expectations, with 5,614 km completed against the goal of 5,150 km. On the financing side, NHAI significantly scaled up asset monetisation, raising close to Rs 287 billion through a mix of toll-operate-transfer (TOT), infrastructure investment trusts (InvITs) and toll securitisation, including its largest-ever InvIT tranche of over Rs 170 billion. The National Highways Infra Trust also raised Rs 160 billion in its third round, covering close to 900 km of highways, marking one of the biggest transactions in this space.
At the policy level, the government has been actively encouraging private investment in the road sector and has cleared a set of high-speed corridor projects spanning over 930 km, with a combined investment of more than Rs 500 billion. Importantly, private capital flows are expected to accelerate significantly, from the current levels of around Rs 200 billion annually to nearly five times that amount within the next six to seven years.
“The way forward lies in designing balanced PPP frameworks that equitably share risks between the public and private sectors.” Sanjeev Gupta
Pawan Kant
The road sector continues to be a torchbearer of India’s infrastructure growth. The national highways network, being the second largest road network in the world, now stretches over 146,000 km, forming the primary arterial network of the country. It is encouraging to see how the government has prioritised this sector. In fact, its share under the National Monetisation Pipeline (NMP) has grown from about 26.6 per cent in NMP-I to 35 per cent in NMP-II, highlighting its strategic importance.
Toll collection reached an all-time high of Rs 729 billion, marking a 12.5 per cent year-on-year increase. This growth was driven by higher traffic volumes on highways, the annual revision of user fee rates, the addition of new tollable road stretches and an uptick in manufacturing, which had been affected in the previous year due to elections.
The build-operate-transfer (BOT) (toll) model saw a revival, accounting for 10 per cent of NHAI’s project awards. Looking ahead, NHAI plans to award 12 more BOT (toll) projects in 2025-26. Meanwhile, the hybrid annuity model (HAM) continues to dominate the awarding landscape, maintaining an average share of 60 per cent over the past five years.
Despite being a priority sector under the NMP, the road sector registered a relatively subdued performance in 2024-25. Project awards and execution slowed down, with approximately 10,660 km of roads constructed and 4,874 km awarded (as of February 2025). Under the Bharatmala Pariyojana, as of June 2025, around 26,425 km has been awarded and 20,770 km constructed. However, awarding under Phase I has come to a halt, and Phase II is yet to receive approval, leading to uncertainty about further progress.
On the financing side, bank credit to the sector has grown at a steady pace, at a CAGR of around 14 per cent since 2020. There has been a slight dip this year, but overall, the trend remains positive.
The authorities have notably favoured HAM contracts in recent times. While HAM offers a balanced risk-sharing mechanism, it presents several challenges. With 40 per cent of the project cost funded by the government, it adds to the debt book. With low entry barriers, there have been instances of aggressive underquoting during bidding, often leading to compromised project quality and delays in completion.
It is important for the authorities to reassess the conventional lowest bid (L1) procurement model and instead explore alternative, robust techno-commercial bidding models that prioritise quality, timely delivery and financial sustainability. Adopting a more holistic and performance-oriented bidding approach is essential to address the structural issues currently impacting the sector.
The year witnessed several key announcements, including the introduction of an annual pass for passenger cars – an initiative aimed at mitigating the financial burden of tolls on car users. However, the challenge of ensuring fair compensation for concessionaires managing toll-based projects remains unresolved. Unless this is addressed, it will cause a financial burden on concessionaires. In 2024, the toll fee revision was delayed on account of elections. While the authorities have been understanding and assuring, the actual compensation towards the same is yet to be effected. Such delays add to uncertainties.
During the year, the sector witnessed divergent views on the continuation of the TOT model for asset monetisation. These differing views led to delays in the roll-out of new TOT tenders. Although it now appears that the TOT model will continue to be used for monetising road assets, the uncertainty and postponements have resulted in fewer packages being awarded and have raised investor concerns about the sector’s strategic direction.
“The shift from the TOT model to InvIT-led monetisation under NMP-II is expected to drive a significant increase in private sector participation.” Pawan Kant
Nageswara Rao
India has the world’s second largest road network, with national highways spanning 146,145 km. Among states, Maharashtra leads with 18,459 km, followed by Uttar Pradesh (12,292 km) and Rajasthan (10,706 km).
For 2025-26, MoRTH has been allocated Rs 2.87 trillion, marking a 2.4 per cent year-on-year increase. Of this, Rs 1.87 trillion is earmarked for NHAI, up from Rs 1.69 trillion. The budget also provides for 15 major projects worth Rs 440 billion covering 937 km to strengthen regional connectivity and foster economic development.
Further, MoRTH has unveiled a plan to develop 50,000 km of high-speed highways through a corridor-based approach, aimed at integrating major economic zones, improving logistics efficiency and supporting India’s vision of becoming a $30 trillion economy by 2047.
“The roads and highways sector will be shaped by technology integration, sustainability and corridor-based development.” K. Nageswara Rao
How is the sector leveraging new technologies for construction, operations and safety? What challenges remain?
Sanjeev Gupta
India’s highway development has increasingly embraced innovative technologies and sustainable practices. Materials such as recycled asphalt pavement, plastic waste and fly ash are being integrated into construction to enhance durability while lowering costs and environmental impact. Thin white topping is being used to extend the life of distressed asphalt roads by creating a composite concrete-asphalt structure. Precast components for bridges, culverts and flyovers are gaining traction, allowing faster execution with higher quality control. In parallel, geosynthetics, geogrids and geocells are being deployed to reinforce soil and reduce pavement thickness requirements.
Digital adoption is also accelerating. Drones are now commonplace for land surveys and progress monitoring, while artificial intelligence-driven systems are being tested to predict road defects and schedule proactive maintenance, minimising downtime and improving safety. Despite these advances, the sector still struggles with execution challenges on the ground. Quality of manpower, dependence on traditional methods for surface preparation and inconsistent supervision often limit the benefits of new-age solutions. In other words, technology can only go so far if not backed by robust on-site practices.
Pawan Kant
Technology is transforming the way roads are built and managed. Artificial intelligence (AI)-driven predictive maintenance, internet of things (IoT)-enabled sensors and monitoring via drones are enabling the real-time monitoring of road conditions, faster identification of defects and data-driven decision-making for repairs. Digital traffic management systems, IoT-enabled sensors and digital twin technology are being deployed for real-time monitoring and asset management.
State-level initiatives in road safety are gaining momentum, with projects like Nagpur’s Intelligent Solutions for Road Safety through Technology and Engineering showcasing how AI can be effectively leveraged to reduce accidents. On a broader scale, NHAI is actively exploring innovative technologies, including self-healing asphalt, to address persistent issues such as potholes.
Geographic information systems are being utilised to build comprehensive asset databases, which are vital for long-term infrastructure planning. NHAI’s Data Lake initiative and its push towards paperless offices reflect a strong commitment to digital transformation.
However, technology integration comes with its own set of challenges – notably high capital costs, inconsistent data standards and implementation hurdles. Despite these, there is a growing emphasis on road maintenance, with more projects being awarded under performance-based and short-term maintenance contracts.
Data security remains a critical concern and will be a key area of focus in the coming years as digital adoption deepens across the sector.
Road safety continues to be a formidable challenge for the sector, with approximately 150,000 fatalities reported annually due to road accidents. In response, the authorities have launched programmes focused on identifying and rectifying accident-prone black spots, alongside other safety measures, to make road travel safer. However, these are generally taken up package-wise.
To maximise the impact of these initiatives, a possible approach could be to take up black spot rectifications across entire corridors, rather than adopting a piecemeal approach that targets isolated sections/packages. To enable this, the authorities could explore cost-effective funding options through multilateral agencies for larger corridor-wide rectifications. Such contracts would be substantial enough to attract reputed engineering, procurement and construction companies, rather than being fragmented into smaller packages typically awarded by the authorities directly to local contractors. This shift could ensure the timely and high-quality execution of multiple black spot rectifications by capable agencies.
At Interise, we prioritise construction zone safety alongside other critical areas by enforcing a rigorous protocol for all pre-construction and pre-maintenance activities. This includes the strategic deployment of impact attenuator vehicles to prevent fatalities and injuries among workers caused by speeding vehicles in these zones.
Nageswara Rao
The sector is increasingly leveraging digital and technological solutions to enhance efficiency and safety across the project life cycle. Advanced construction techniques such as mechanised paving, drone-based surveys and digital project monitoring dashboards are improving accuracy, productivity and execution speed. IoT-enabled sensors and predictive analytics further optimise asset performance and reduce downtime.
The key challenges include ensuring widespread technology adoption, managing investment costs, and developing the necessary skills to operate and maintain these advanced systems effectively. Moreover, lowest bidder (L1)-based contract awards often restrict smaller contractors from adopting new technologies, unlike leading engineering, procurement and construction (EPC) players that are better positioned to leverage them.
What best practices are being followed to reduce the sector’s carbon footprint and promote greener roads?
Sanjeev Gupta
Sustainability is gradually moving to the core of highway development in India. One of the most effective practices has been the reuse of recycled asphalt pavement, which reduces the demand for virgin aggregates and minimises mining. Fly ash and pond ash are increasingly being adopted in embankments and as partial cement replacements, lowering overall emissions. Warm-mix asphalt technology is being introduced to cut down fuel consumption during production, while the concept of perpetual pavements helps extend asset life and reduce frequent rehabilitation.
The sector is also experimenting with electric and hybrid machinery on construction sites, along with renewable energy sources such as solar for street lighting and studs. Innovative uses of construction and demolition waste in embankments and sub-base layers are gaining acceptance. Together, these initiatives are helping the sector chart a path towards greener and more resilient infrastructure.
Pawan Kant
Sustainability is increasingly becoming a central focus in the road sector. There is a growing adoption of recycled materials in highway construction, including fly ash, plastic waste, recycled asphalt and bio-bitumen. Notably, India’s first highway using lignin-based bio-bitumen was recently unveiled by Praj Industries Limited, and NHAI’s 135 km six-lane Eastern Peripheral Expressway incorporated 12 million cubic metres of fly ash in its construction.
Precast construction techniques are gaining traction for their ability to accelerate project timelines and enhance construction quality. Additionally, the use of LED lighting for highways and solar panels at strategic locations, such as toll plazas, is driving a shift towards more sustainable operations.
There is also a strong emphasis on plantation along highways, which not only improves aesthetics but also contributes meaningfully to carbon sequestration and environmental restoration.
Nageswara Rao
The use of green materials in infrastructure projects is most effective when innovation is combined with practical application; for example, the use of sewage water in an urban infrastructure project in Bengaluru.
By adopting alternatives such as polymer-based drilling fluids or project-specific admixtures, projects can achieve improved performance while lowering their environmental impact. Similarly, replacing ordinary portland cement with industry by-products such as fly ash and ground granulated blast furnace slag helps reduce the carbon footprint of concrete while enhancing its long-term durability.
In addition to material choices, optimising construction methods and working closely with stakeholders ensures that sustainable solutions are cost-effective, ultimately delivering infrastructure that balances engineering excellence with environmental responsibility.
What challenges still remain unaddressed?
Sanjeev Gupta
Despite progress, several pain points continue to affect efficiency and timelines. The preparation of detailed project reports often lacks accuracy, particularly in difficult terrain such as hilly or flood-prone areas. Project scopes under the EPC or HAM contracts are sometimes poorly defined, leading to scope changes and disputes. The rigid uniformity in project timelines, irrespective of local terrain or climate, also needs rethinking.
Another persistent challenge is the current practice of awarding contracts solely on the lowest-bid basis, which can compromise quality and sustainability. Land availability and utility shifting remain critical bottlenecks, with projects often awarded before encumbrance-free land is fully secured. Addressing these issues will be essential to ensure smoother execution and reduce claims and delays.
Pawan Kant
Despite notable progress, several long-standing challenges continue to hinder the road sector. Land acquisition and securing right-of-way approvals require more focused attention to enable the timely roll-out of new tenders. Dispute resolution mechanisms also need to be made more efficient and time-bound to reduce project delays. The timely resolution of issues such as toll fee revision compensation, target traffic, demonetisation claims, and mechanisms for compensating concessionaires for annual pass holders will evoke confidence in investors in the sector. India is currently witnessing increased participation of global sovereign and pension funds, along with large private equity fund houses, reflecting growing investor confidence in the country’s infrastructure and economic potential. This comes after years of sustained engagement with them through roadshows and policy outreach, where the authorities actively encouraged global investors to invest in the road sector. It is essential that the authorities recognise these global investors as strategically important partners for national infrastructure development. Active engagement with them during policy formulation, along with timely resolution of issues affecting their investments in concession companies, will help build trust and foster long-term collaboration.
Although the pace of construction is commendably fast, significant efforts are still needed to ensure consistent quality across projects. It is essential to establish a protocol for quality at the earliest possible stage, and the importance of on-site quality assurance cannot be overstated. Fundamentally, there is a pressing need to foster a culture of quality consciousness among engineers, supervisors and workmen to achieve world-class road infrastructure. The current L1 system for awarding works has a direct impact on the quality of independent engineers and detailed project report consultants, much like it does with construction contracts. Due to the absence of meaningful entry barriers or the presence of very low ones, the competencies of the agencies being engaged are often inadequate to deliver the expected outcomes.
There is also untapped potential in monetising state road assets. Balancing rapid development with environmental sustainability and ensuring long-term asset upkeep are challenges we must address head-on.
Nageswara Rao
Despite strong momentum, the roads sector continues to face several unaddressed challenges. Land acquisition and right-of-way remain persistent hurdles, often delaying project timelines and escalating costs. Financial bottlenecks such as delays in releasing payments and issues related to bank guarantees further strain contractors. Arbitration and contract disputes are another recurring obstacle, tying up capital and slowing project execution. Additionally, the continued reliance on the L1 system for awarding projects overlooks critical factors such as financial stability and technical expertise, increasing the risk of delays, cost overruns and incomplete delivery. While funding and policy direction remain strong, addressing these execution challenges is essential for sustaining long-term growth in the sector.
How can private sector investment be further incentivised?
Sanjeev Gupta
Private capital is vital for the sector’s long-term growth, but investors are often cautious about rigid contract structures and excessive risk transfer. The way forward lies in designing more balanced public-private partnership (PPP) frameworks that equitably share risks between the public and private sectors. For instance, minimising demand risk and ensuring sustainable revenue models could attract broader participation.
Equally important is transparency. Investors need reliable, easily accessible project information and realistic assessments of site conditions. Complementing this with sovereign guarantees, easier access to financing and clear dispute resolution mechanisms would create a more favourable business environment.
Pawan Kant
Encouraging private investment in the road sector requires a multi-pronged approach. Investors need clarity, stability and a fair risk-reward balance. Addressing regulatory complexities, streamlining land acquisition processes and ensuring predictable revenue models are key enablers. A renewed push for BOT (toll) projects and the expansion of public-private partnership (PPP) frameworks can further attract private capital. Further, demonstrating the authorities’ commitment to the timely tendering of packages under the TOT model will go a long way in boosting investor confidence.
However, the most critical aspect is respecting and supporting existing investors. Their concerns must be acknowledged and addressed, and they should be actively involved in policy formulation. This inclusive approach will help transform PPPs from transactional contract relationships into true win-win partnerships, fostering long-term collaboration and sustainable infrastructure development.
Nageswara Rao
Currently, the risk is heavily skewed in favour of the project authorities, leaving EPC contractors or concessionaires with limited recourse. To encourage broader participation, risks should be more evenly distributed and payments must be made promptly.
Currently, concessionaires must meet both technical and financial qualification criteria to bid for BOT projects. If we separate the technical requirements from the concessionaires, a larger number of companies and financial institutions are likely to participate. To ensure project quality, measures can be introduced requiring interested companies to partner with qualified EPC contractors. Additionally, offering high-value projects will help attract serious financial institutions.
What emerging trends are likely to shape the sector in the coming years?
Sanjeev Gupta
The next phase of growth in India’s highways will be defined by both scale and technology. On the policy front, the Pradhan Mantri Gram Sadak Yojana IV has been launched with an outlay of over Rs 700 billion to connect 25,000 unserved habitations and upgrade bridges across 62,500 km of rural roads. High-speed corridor development continues to be a priority, with multiple projects already approved.
Technology adoption in tolling is set for a leap forward with pilot projects on global navigation satellite system-based electronic toll collection, which could eventually replace FASTag for barrier-free movement. On the strategic side, large-scale initiatives such as the Arunachal Frontier Highway will not only serve as vital infrastructure in border areas but also transform connectivity for some of the country’s most remote regions. Together, these developments indicate a future where India’s highway sector is larger, smarter, greener and more inclusive.
Pawan Kant
The outlook for the road sector appears promising. With a robust project pipeline, a favourable policy environment and continued government support, the sector is well positioned for sustained growth. The MoRTH has laid out ambitious plans, targeting Rs 10 trillion worth of project awards annually, including Rs 7 trillion in 2025-26 alone.
Looking ahead, we can expect a stronger emphasis on road safety, enhanced last-mile connectivity, improved wayside amenities, adoption of sustainable construction practices and widespread integration of technologies.
The shift from the TOT model to InvIT-led monetisation under NMP-II is also expected to drive a significant increase in private sector participation, offering more predictable returns and diversified investment opportunities. However, it will be essential to ensure that past issues are addressed swiftly to maintain and strengthen investor confidence.
Nageswara Rao
The roads and highways sector will be shaped by technology integration, sustainability and corridor-based development. Increased adoption of green materials, energy-efficient equipment and sustainable material management will embed sustainability as a core design principle. Meanwhile, the corridor-based approach for high-speed highways is expected to enhance logistics efficiency, stimulate regional economies and support India’s long-term growth vision.
