The Bharatmala Pariyojana (BMP) program, India’s most extensive highway infrastructure initiative, has encountered significant challenges as its project cost surged to Rs 10.64 lakh crore, more than double the initial estimate of Rs 5.35 lakh crore.
The escalation is attributed to a sharp increase in input costs and rising expenses associated with land acquisition.
According to the rating agency ICRA, the pending cabinet approval for the revised cost of Bharatmala Phase-I has adversely affected project awarding activity, leading to a 48 per cent year-on-year decline in the first seven months of FY2024.
ICRA Limited, an independent and professional investment information and credit rating agency based in India, provides insights and ratings in the financial domain.
This marks a substantial decrease from the corresponding period in FY2023, impacting the overall outlook for project awarding in FY2024.
Ashish Modani, ICRA VP and Co-Group Head highlighted that a significant portion (almost 95 per cent) of road awards by the Ministry of Road Transport and Highways (MoRTH) in the last five years utilised the hybrid annuity mode (HAM) and engineering, procurement, and construction (EPC) route.
This places the entire funding burden on the ministry. Modani also pointed out that the burden on MoRTH for BOT (Toll) projects is lower, leading to a shift in focus toward such projects due to substantial cost escalation in BMP and increased funding requirements.
ICRA further noted that the average number of bidders for EPC and HAM projects was 15 and 8, respectively, while for BOT (Toll) projects, it remained below five, reports Financial Express.
This information suggests a potential preference or feasibility perceived by contractors for BOT (Toll) projects over other modes.
In summary, the challenges faced by the Bharatmala Pariyojana, including cost escalation and funding burdens, seem to be impacting project awarding activities, leading to a shift in focus toward BOT (Toll) projects.
The situation is closely monitored, and the pending cabinet approval for the revised cost is a critical factor in the project’s progression.
The Ministry of Road Transport and Highways has conceived Bharatmala Pariyojana as a comprehensive initiative for the highways sector. The first phase of this program entails the implementation of 34,800 kilometres of national highways within a span of five years, from 2017 to 2022, with an approved estimated budget of Rs 5,35,000 crore.
As of now, about 23,500 km has been awarded and about 11,400 km has been completed. The balance projects are targeted for award by Financial Year 2024-25.
India has about 63.73 lakh km of road network, which is the second largest in the world.
National Highways play a very important role in the economic and social development of the country by enabling efficient movement of freight and passengers, connecting people and facilitating economic activities.