In recent years, the road sector has emerged as one of the largest recipients of budgetary allocations across infrastructure sectors, highlighting its strategic importance in driving economic growth. Flagship government programmes such as the Bharatmala Pariyojana (BMP) and the Pradhan Mantri Gram Sadak Yojana (PMGSY) have driven the rapid expansion of the road network. Meanwhile, multimodal logistics parks, at various stages of development, are expected to enhance logistics efficiency, with national highways already carrying over 40 per cent of the total freight.
In line with the sector’s evolving needs, the government has introduced various policy measures, including revisions to model concession agreements (MCAs), to address contractor concerns and monetisation initiatives to explore alternative funding sources. The government is now shifting its attention towards improving construction quality, execution standards and asset maintenance, while also integrating new technologies and long-term sustainability into road construction.
Evolving policy landscape drives quality-centric and timely development
The Ministry of Road Transport and Highways’ (MoRTH) priorities are evolving. Following the rapid pace of construction in recent years, there is now a noticeable shift in focus towards maintenance and repair, amid rising concerns over subpar construction quality and engineering standards. In response, the ministry has introduced several corrective measures. To curb aggressive bidding, MoRTH has rolled out revised additional performance security norms; an extended defect liability period (DLP); and a performance-based rating system for concessionaires. Additionally, maintenance work is now being undertaken via performance-based maintenance contracts and short-term maintenance contracts for assets where the DLP or concession period has ended. These policies signal the ministry’s clear stance – cost-cutting at the expense of quality will no longer be tolerated.
That said, some legacy challenges, such as land acquisition hurdles and delays in pre-construction activities, continue to plague the sector. To address these, the ministry has launched digital platforms such as the Bhoomi Rashi and Parivesh portals to streamline such processes. More recently, it has issued a directive to synchronise pre-construction activities with project approval, award and declaration of appointed dates to avoid future setbacks.
Alongside these measures, the ministry is renewing its focus on the build-operate-transfer (BOT) model. It is expected to launch a revamped MCA for the model to reduce traffic-related risks and revive private participation. Rapid development remains a key focus area, with rural roads being given equal attention, with the recent approval of PMGSY-IV.
Together, these corrective measures and policy interventions are expected to lay the foundation for more steady and sustained growth in the coming months, provided these policies are implemented effectively.
Annual performance scorecard: Mixed progress amid uncertainty and upheaval
Highway development entered a phase of slowdown in 2024-25, deviating from its usual accelerated path, as both project award and execution saw a decline. During the year, around 10,660 km of national highways were constructed, an annual decline of around 14 per cent. Despite the dip, the average construction pace remained at a healthy 29 km per day, supported by the strong project pipeline developed over the years. Till February 2025, the cumulative award figure stood at only 4,874 km.
This slowdown in overall activity during the first half of 2024-25 can be attributed to the general elections and an extended monsoon. By September 2024, only 30 per cent of the year’s total construction figures had been achieved at 3,337 km, while awards was less than 30 per cent at 1,445 km. Procedural delays in project cost approvals, issuance of appointed dates and a greater focus on maintenance further impeded progress. Awards were also impacted by the union cabinet’s decision not to approve BMP-II, with awards already halted under BMP-I. Furthermore, transition challenges in reviving the BOT model slowed fresh project awards. After a negligible presence in the past, BOT accounted for 10 per cent of awards in 2024-25.
With the election year now over, policies gaining more clarity, and most importantly, with MoRTH targeting the construction of projects worth Rs 15 trillion over the next two years, award is expected to pick up in the near term. In line with this, the National Highways Authority of India (NHAI) has already identified 124 projects spanning 6,376 km for award in 2025-26 at an estimated cost of Rs 3.45 trillion. However, slow execution can be expected in the near term due to muted award activity in the previous year. Therefore, industry experts expect road construction to remain in the range of 9,500-10,000 km during 2025-26.
Building smart and sustainable roads
As the road network continues to expand, the sector has aligned itself with the globally acknowledged sustainability and digital transformation agenda. Sustainable construction practices and the adoption of new technologies are now integral to highway planning, construction and asset management. The use of bitumen, fly ash, plastic waste and geosynthetics has not only improved road durability but also helped address resource scarcity and carbon emissions. Recently, MoRTH mandated the use of precast concrete for non-critical components in big-ticket highway projects.
To monitor road quality, network survey vehicles are being deployed alongside drone analytics monitoring systems. The government is also rolling out advanced traffic management systems in phases to enhance safety and curb violations.
Over the past decade, the tolling system has also undergone modernisation. Now, FASTag accounts for over 98 per cent of all transactions. Interestingly, an annual pass priced at Rs 3,000 will be available soon. Building on this success, the government is now piloting barrier-free tolling using the automatic number plate recognition (ANPR) FASTag system. While these initiatives mark a significant step forward, their on-ground implementation is yet to gain momentum.
Leading the monetisation drive
In line with industry expectations, the road sector has emerged as a front runner in asset monetisation. Under the first phase of the National Monetisation Pipeline, the sector mobilised Rs 1.15 trillion, the highest among all infrastructure sectors. This strong performance has set the stage for more ambitious targets. Under Phase II, the target has more than doubled to Rs 3.5 trillion. NHAI’s recent report outlining strategies for more effective monetisation highlights the government’s focus on unlocking greater value from operational assets. However, there are still some doubts about the preferred route, following MoRTH’s announcement to phase out toll-operate-transfer (TOT) in favour of infrastructure investment trusts (InvITs). Achieving the aforementioned targets will require a transparent and well-coordinated execution strategy, with the realisation that all sources are complementary rather than competing models.
India’s InvIT market has grown significantly in recent years, driven by policy reforms and regulatory support. Road InvITs have gained significant traction, accounting for nearly 50 per cent of total InvIT assets under management (AUM). In 2024 alone, these trusts accounted for over 50 per cent of the total asset deal value in the road sector at over Rs 190 billion. Of late, private-listed road InvITs such as Cube Highways Trust and Vertis Infrastructure Trust have expressed interest in going public. The Securities and Exchange Board of India has issued a consultation paper regarding easing the norms for this conversion. Following a successful market debut, rising investor confidence and an overall maturing market, industry experts estimate the road sector InvIT AUM to grow by 37 per cent, from Rs 2.4 trillion in March 2025 to Rs 3.27 trillion by March 2026.
The road ahead for continued expansion
In essence, the government is now recalibrating its approach based on the lessons learnt over the past few years. Earlier, to accelerate road development, the government had lowered the eligibility criteria, resulting in increased competition, which further led to project delays, cost overruns and a decline in construction quality. Now, the government is reintroducing tighter policy measures.
While these moves mark a step in the right direction, they also underscore the need for strong on-ground implementation and adherence. Policy clarity is another area that needs more focus. For instance, the future of highway monetisation through the TOT model remains uncertain, even after the recently introduced monetisation strategy. Similarly, satellite-based tolling, once positioned as the next big thing, appears to have been shelved in favour of more viable alternatives such as ANPR-based systems.
To conclude, the sector has made tremendous progress over the past decade, driven by visionary initiatives and sustained government impetus. Yet, much remains to be done to build a truly world-class highway network. Achieving the Viksit Bharat 2047 vision will require a stable and forward-looking policy framework. The past year has already signalled such a shift, with a renewed focus on quality construction and policy measures aimed at enabling robust future growth.
Bhavya Bhandari
