ECONOMY

Construction Sector Q1 Preview- Marked By Moderate Execution; But Weak Project Awarding Continues: Nirmal Bang

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Nirmal Bang Report

In Q1 FY25, the overall highway construction stood at 1,288 km versus 1,465 km in Q1 FY24 due to elections, extreme heat and unavailability of labor.

The central government has set a target of 12,000-13,000 km of highway development for FY25. The reduction in target can be attributed to a slowdown in construction and project awarding throughout most of Q1 FY25, when the model code of conduct for elections was in effect. The government has abandoned the linear approach of measuring highway construction in favor of actual lane kms.

So, under the new technique, a 10-km length highway with four lanes is recorded as 40km.

The main highway development scheme Bharatmala has exceeded its budget and completion timeline; it is now awaiting further clearances for the National Masterplan for Highway Development before awarding can begin.

While the Masterplan is being reviewed by the cabinet, the NHAI has decided to make a significant push for private investment in highway expansion using the Build Operate Transfer-Toll model.

It has identified 53 highway projects with a value of Rs 1.5 trillion that will be awarded to private companies and their total length will be ~5,214 km.

Bids for eight highway segments totalling 297 km in length have already been invited. To make BoT more appealing to private developers, the MoRTH has released a new Model Concession Agreement. According to our estimate, fresh awarding will start in H2 FY25.

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