The National Highways Authority of India (NHAI) has set an ambitious target for the current financial year (FY24). They aim to construct highway stretches totalling 5,060 kilometre, surpassing last year’s record of 4,882 kilometre.
The NHAI has witnessed a 13 per cent increase in the pace of construction in 2022-23, prompting them to set an even higher target for this year. Additionally, they plan to award highway projects spanning 6,036 kilometre, compared to the 6,003 kilometre awarded in the previous financial year.
In 2022-23, the NHAI launched 167 projects covering a total length of 5,213 kilometre. Currently, around 55,000 kilometre of roads are in various stages of execution, as per an ICRA report.
During the first two months of this financial year, the NHAI has constructed 655.31 kilometre of highways and awarded only one project of 22.42 kilometre.
Capital expenditure by the NHAI reached an all-time high of Rs 1.74 trillion in FY23, surpassing the government-provided Rs 1.58 trillion. The additional funds of around Rs 15,000 crore came from project-based financing.
For this year, the NHAI has allocated Rs 1.62 trillion from the budget, and they aim to secure an additional Rs 15,000 to Rs 20,000 crore through private financing via special purpose vehicles for identified projects.
The total capital expenditure of the Ministry of Road Transport and Highways for FY24 has been set at Rs 2.58 trillion, an increase from the Rs 2.06 trillion spent last year.
Apart from the traditional engineering, procurement, and construction (EPC) model, the NHAI is exploring other modes of financing highway construction. These include the hybrid annuity model (HAM) and build-operate-transfer (BOT). HAM involves the NHAI making payments to concessionaires in installments, while in BOT, private developers bear the construction costs and recover their investment through toll collection.
Between 2007 and 2014, only BOT was used for highway construction before it faced a slowdown. In 2018-19 and 2019-20, no projects were awarded on a BOT basis. Currently, its share in total highway construction is less than 5 per cent , but the government aims to increase it to 10 per cent
According to the ICRA report, the EPC model is expected to remain the primary mode of highway construction, accounting for 70-75 per cent of total awards this year.