Road construction projects pick up but NHAI debt reduction still cause for concern: Nuvama
Sep 18, 2024
New Delhi [India], September 18 : Road construction projects that had halted during the first quarter of FY25 due to imposition of election model code of conduct, have picked up significantly, according to a research report by Nuvama
The report noted a significant uptick in road construction during July 2024, with a combined total road construction of 600 kilometres, representing a 43 per cent year-on-year surge.
"Road construction in Jul-24 at the combined level was 600 km, surging 43 pc YoY; of this, NHAI constructed 291km. Year-to-FY25 construction stands at around 2,534 km at a pace of 20.8 km/day, of which NHAI constructed 1,135 km," said the report.
Due to the imposition of model code of conduct because of general elections, many road projects could not be awarded during the first quarter of FY25. However, awarding of road projects have picked up since then, with 468 kilometres of road projects being awarded in July 2024.
The report also added that for the current financial year (FY25), road construction stands at approximately 2,534 kilometres as of July, reflecting a 5 per cent year-on-year decline and an average construction pace of 20.8 kilometres per day.
The National Highways Authority of India (NHAI) contribution to this figure is 1,135 kilometres. In comparison, FY24 saw total road construction of 12,349 kilometres at a pace of 33.7 kilometres per day, with NHAI constructing 6,644 kilometres of roads.
NHAI contribution in road construction will drop further as government is also focusing on reducing debts of NHAI, which has surged to over Rs 3.35 lakh crore. Government intends to reduce it to Rs 1 lakh crore.
"In recent years, NHAI's debt has been a point of concern, and the current strategy focuses on stabilizing its financial situation rather than increasing its borrowing capacity. By maintaining a minimal budgetary outlay and avoiding new debt, the government aims to manage the NHAI's resources more prudently." said the report
NHAI is seeing limited financial growth in its budgetary allocations, with an increase of just around 1 per cent for the current fiscal year 2025.
According to the report, the Internal and Extra Budgetary Resources (IEBR) projection for NHAI remains at zero for FY25, signalling the government's cautious approach to managing the authority's finances.
This conservative stance reflects the government's clear intention to curb further debt accumulation for the NHAI.
