Why India Ratings Downgraded Its Road Sector Outlook  To Negative
Vehicles travel along a road next to a flyover in Surat, Gujarat, India. (Photographer: Karen Dias/Bloomberg)

Why India Ratings Downgraded Its Road Sector Outlook To Negative

India Ratings and Research Pvt. Ltd. downgraded its outlook for the country’s road sector in 2019-20 to ‘negative’ from ‘stable’, saying the National Highway Authority of India is unlikely to meet its targets on awarding road projects.

“The NHAI plans to award around 7,000-7,500 kilometres in FY20, but they have done only 500-600 kilometres as of August. So there’s a steep task to be achieved over the next six months,” Vishal Kotecha, associate director at India Ratings and Research, told BloombergQuint.

The task is especially difficult since the Prime Minister’s Office raised questions about the NHAI’s high levels of debt and asked to shift focus to build-operate-transfer toll projects which are funded by developers through equity and debt.

“In a market where people have burnt their fingers in the past—developers as well as investors—having such toll projects awarded going forward could be challenging,” he said.

NHAI had shifted first to a hybrid annuity model and then to an engineering-procurement-construction model from the BOT model between 2014 and 2016 after private funding dried up for developers.

Watch | India Ratings’ Vishal Kotecha on why Bharatmala is an ambitious project that is unlikely to be met

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