HIGHWAY HICCUPS?

Slowdown in awarding highway projects, driven by industry factors and project complexities, pushes NHAI towards debt reduction and private partnerships for sustainable development

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Post-pandemic, the pace of awarding of national highway projects showed a huge spike. In fact, estimates suggest that nearly half of all projects awarded in the five years ending FY23 were awarded between FY22 and FY23.

However, the pace of awarding national highway projects has fallen in FY24. Experts as well as consulting and auditing firms share that the decline in awarding of national highway projects was steeper than estimated.

A recent decline in awarding national highway projects has sparked several key questions among sector analysts and experts: What are the reasons behind the slowdown? Will it impact construction? Is the National Highway Authority of India (NHAI) well-funded to handle delays? And what alternative funding options does it have? We’ll explore these critical questions in detail.

CHALLENGES IN AWARDING AND EXECUTION

A study by CareEdge Ratings sheds light on the slowdown in national highway construction witnessed in FY24. It analyzes the current state of the Indian roads and highways sector, including its outlook on awarding mix and pace of project execution.

Notably, the ratings agency highlights two key factors contributing to this slowdown: increased competition within the industry, and growing complexities associated with project execution. Let’s dig deeper into the business situation in the industry based on these findings.

According to CareEdge’s study, there has been a significant drop in the awarding of national highway projects in FY24. The study reveals that the awarding of highway projects declined by 31% in FY24 compared to FY23.

This decline is steeper than estimated by analysts and economists, who anticipated a fall in the range of 10% to 15% due to pending approval of revised costs from the union cabinet.