Road construction India: All eyes on General Elections 2024: Road construction to be ramped up by 16-21%

The central government intends to accelerate the construction of roads in FY24 by 16-21% to 12,000-12,500 km, with a healthy pipeline of projects and an increase in capital expenditure outlay, a report by ICRA said Thursday.

“The project pipeline remains strong at 55,000 km under various stages of execution. This, along with focus on project completions ahead of general elections, is expected to boost execution to 12,000- 12,500 km in FY24,” said Vinay Kumar G, Sector Head, Corporate Ratings, ICRA.

Prime Minister Narendra Modi-led government in its last budget before the general elections of 2024 announced a substantial increase in capex allocation, with Rs 10 lakh crore figured in for FY24, up 37.4% from the previous fiscal.

The Centre’s capital expenditure on road transport and highways for April-November 2022 stood at Rs 1.49 lakh crore, up from Rs 0.74 lakh crore in the same period a year ago, as per The Economic Survey 2022-23.
Regarding National Highways, around 10,450 km were constructed in FY22, up from 6,6061 km in FY16. The National Highways Authority of India (NHAI) and National Highways and Infrastructure Development Corporation Ltd (NHIDCL) are primarily responsible for constructing national highways and expressways in India.

However, the pace of road construction slowed down since then. NH constructions in India reached a record high of 37 km per day in FY21 but slowed to 30.11 km per day in FY23.“The execution was impacted in H1FY23, on account of elevated commodity prices as well as prolonged monsoons in certain geographies, which affected the productive day,” said Kumar. “The situation improved in H2 FY2023 with road construction witnessing a YoY growth of 2%, thereby containing the overall decline at 1% in FY23 (to 10,331 km from 10,457 km in FY22),” he added.The current project pipeline remains at 55,000 km under various stages of execution. ICRA expects this, along with a focus on completing projects ahead of the general elections to boos execution to 12,000-12,500 km in FY24.

However, with the model of conduct deployed in Q4FY24 due to the elections, the awarding activity is expected to take a hit in FY24. ICRA expects an overall decline to 9,000-9,500 km from 12,375 km in FY23.

It may be noted that Q4 typically accounts for 50-60% of the total awards in a given year.

The rating agency has projected toll collection to grow by 6-9% in FY24, primarily supported by a 4%-5% growth in traffic.