The pace of India’s national highway (NH) construction is likely to increase, albeit marginally, in FY24. The higher rate of 32-35 km construction per day may be impacted by monsoons and upcoming Lok Sabha elections as dates are scheduled to be announced in the fourth quarter.

A senior government official said NH construction target for FY24 is likely to be 12,500-13,000 km. The parliamentary standing committee on roads, in a report placed before Parliament in March 2023, had said the Ministry of Road Transport and Highways (MoRTH) intends to award 12,000 km of NHs and construct 12,500 km in FY24.

CRISIL Research, in a February report had said that it expects 12,000-13,000 km of NHs to be constructed in FY24. The award and construction numbers by the MoRTH have not been released.

Construction activity

Government sources said that NH construction activity picked up in H2 FY23, but has not been “very inspiring” in April and May 2023 due to delay in land acquisition, financial issues, delay in release of payments to contractors, etc.

MoRTH constructed 523 km of NHs in April 2023 against 578 km a year-ago, while it awarded 114 km against 201 km during the same period. Similarly, in May 2023, 1,465 km was constructed against 1,307 km in May 2022. Awarding stood at 382 km against 496 km.

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“We expect activity to pick up slightly in June, before monsoon rains affect work. Effectively October-December will see good traction with some deceleration setting in during Q4 FY24 as Lok Sabha elections are scheduled to be announced,” the official explained.

A National Highways Authority of India (NHAI) official said that what can make up for the delay would be a higher pace of construction at more than 35 km per day. “In FY23, the pace was almost 30 km per day. This year, plans are for reaching a higher pace, but it will easily be around 32-35 km on an average,” he added.

Crisil Ratings Director Anand Kulkarni pointed out that NH construction hit an all-time high of around 36.5 km per day in FY21 following which there has been some moderation over the next two fiscal years.

Focus on infra development

In FY23, high commodity prices and heavy rains affected the pace of construction in H1 FY23 and NH construction slowed to 19.4 km per day.

Nevertheless, there was a sharp pick-up in construction pace in Q4 which pushed the number for the full fiscal to 28.3 km per day (a tad lower than 28.6 km per day in FY22), he added.

This is also evident from the sales numbers from the Indian Construction Equipment Manufacturer’s Association, who noted that the industry recorded an excellent 26 per cent y-o-y growth with sales crossing the one lakh unit mark in FY23. However, road construction equipment saw a de-growth of 3 per cent y-o-y.

“Crisil expects the pace of NH construction to improve to 32-34 km per day for FY24 driven by increased focus on construction of already awarded projects. Having said that, stagnant awarding will limit any substantial increase in construction over the medium term,” Kulkarni projected.

CRISIL’s MI&A Research, in a report, pointed out that the FY24 Budget underscored the government’s focus on infrastructure development with a big increase in infrastructure spending.

At ₹12.6-lakh crore, the aggregate budgetary support for the 11 core infrastructure ministries such as Railways, MoRTH, MoHUA, etc, in FY24 budget estimate (BE) was up a sharp 17 per cent over revised estimates (RE) for FY23.

Almost a fifth (20 per cent) of this outlay was allocated to MoRTH making it one of the most well-funded infrastructure ministries, only behind railways.

The MoRTH has been allocated around ₹2.70-lakh crore as BE for FY24, which is about 98.7 per cent of the projected demand of ₹2.74-lakh crore. It is a 35.8 per cent above FY23 BE (around ₹1.99-lakh crore) and 25 per cent over the net RE for FY23 (₹2.17-lakh crore).

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