Highway construction’s pace bulldozes pandemic barriers! Sets new record

The latest highway construction signals that the construction sector of the economy, which posted a recovery with 14.5% growth in gross value added (GVA) in Q4FY21, may somewhat retain the momentum in Q1 this fiscal.

Despite the pandemic-induced lockdown and restrictions on mobility in large parts of the country, highway construction grew by 74% on year in April-May of the current financial year to 1,470 km or 24.1 km/day. Of course, the sharp year-on-year growth is on a low base (14.1 km/day in April-May 2021), but even in comparison to April-May 2020 (28.2 km/day), the performances of state-sector highway builders were creditable in the first two months of the current fiscal.

The latest highway construction signals that the construction sector of the economy, which posted a recovery with 14.5% growth in gross value added (GVA) in Q4FY21, may somewhat retain the momentum in Q1 this fiscal.

The sector, which is not facing any funds constraints as projects being implemented are almost totally government-funded via the engineering procurement and construction (EPC) contracts or the hybrid annuity model (HAM), is clearly one of the most unaffected by the lockdown.

Of the total construction in the first two months of the current fiscal, the ministry of road transport and highways (MoRTH) built 790 km followed by the National Highways Authority of India (NHAI) (465 km) and National Highways and Infrastructure Development Corporation (215 km).

The NHAI set an ambitious 4,600-km highway construction target for 2021-22. Last fiscal, NHAI constructed a record 4,192 km, up from 3,979 km developed in 2019-20 and 3,380 km in 2018-19. NHAI chairman SS Sandhu recently told FE that the authority was confident on achieving the target even as there had been some impact on highway construction lately owing to labour shortage in some sites due to the second Covid wave.

Sources said project awards by NHAI in the current fiscal could be close to 5,000 km and HAM is expected to have the largest share of awards followed by EPC. Build-operate-transfer projects, which are likely to gain momentum will constitute between 5-10% of the award basket. Project awards through the BOT route drew a blank in both 2018-19 and 2019-20.

Highway construction in the country touched an all-time high of 13,298 km in 2020-21 (36.4 km/day). Analysts attributed the record construction to a slew of industry-friendly measures that the government had taken during the pandemic year, including those to ensure better cash flow to the contractors. In a recent report, Crisil said, “Though the second wave of infections has dampened this momentum, it may not have a material bearing on growth for the current fiscal.”

During April-May of the current fiscal, project awards, however, declined to 663 km from 747 km awarded in the same period last year.

The country’s national highway length has increased by 50% from 91,287 km, as of April 2014 to 1,37,625 km, as on March 20, 2021, the road ministry said. Average annual project awards during FY15 to FY21 were up 85% compared with the FY10-FY14 period. During 2020-21, 10,467-km highway project was awarded, up from 8,948 km a year earlier.