Despite Gadkari’s Tall Claims, Road Construction Is Way Behind Target
Union Road and Highways Minister Nitin Gadkari has lowered his target of building new roads in the country. Speaking to reporters in New Delhi, Gadkari conceded that his ministry will fall short of building 40 kilometres of new roads each day.
A Long Way To Go
But Gadkari maintained the National Highways Authority of India’s FY17 target of awarding new road projects to build 15,000 kilometres even though the road authority’s own data draws a very different picture.
The NHAI has awarded contracts to build only 2,360 kilometres in the first seven months of this financial year, that’s 16 percent of the target. According to a senior official in NHAI’s planning and statistics department, a total of 2,597 kilometres have been awarded between April and November this year, indicating that another 237 kilometres were added in November, .
The total cost of these projects stands at Rs 31,265 crore.
The projects have been awarded under three categories- engineering, procurement, and construction (EPC); build, operate, and transfer (BOT); and hybrid annuity model (HAM).
Nearly two thirds of the projects have been awarded in the HAM category, the data reveals.
Road construction has also fallen short of the target by a very long stretch. The data sourced by BloombergQuint from the NHAI website shows that a mere 1,417 kilometres have been built so far this year, translating to an average of 6 kilometres per day versus the targeted 40 kilometres. That’s just 15 percent.
Gadkari claimed it will go up substantially by the end of this year, though it’s not clear how such a big shortfall can be covered in just four months. The minister acknowledged the backlog by trimming the target a wee bit.
Will definitely be able to build 30-35 kilometres of roads every day, if not more.Nitin Gadkari, Road and Highways Minister
Analysts say land acquisition continues to be one of the biggest hurdles for new road projects.
“NHAI’s performance is slower than expectation and its own target itself due to regulatory hurdles and delays in land acquisition,” said Teena Virmani, vice president of research at Kotak Securities.
“It has to acquire 80 percent of the land before awarding the project. Due to delays in acquiring this much land, awarding activity is slower than NHAI’s own target,” she added.
Ashish Agarwal, director at Equirus Capital Pvt. Ltd. concurred.
“That is (land acquisition) one of the reasons why project awards that he (Nitin Gadkari) has targeted have not taken place,” said Agarwal.
He believes that part of the problem lies in awarding the projects under the hybrid annuity model. “They have gone a little slow on HAM. Given that the financial closures at HAM have not yet happened at a rapid pace,” Agarwal said.
With just four months till the financial year end analysts are not hopeful that the targets will be achieved.
Agarwal said it would be challenging for the authority to even complete half of the target. “They are definitely not going to (meet the target). I mean it will be challenging for them to even achieve 6,000-7,000 kilometres (this fiscal),” he said.
“There is a strong bid pipeline for next quarter but we still believe that achieving the target of 15,000 kilometres is difficult,” said Virmani.