Roads and road transport system in India

 

India has the second-largest road network in the world, Total Road Length – – 6.4 million km (comprises of national & state highways and urban & rural roads).

 

Importance –

    • Transportation of goods – 64.5% by road.
    • Passenger traffic – 90% by road.

National highways account for 2% of the total road network and carry over 40% of total traffic. Highway construction in India increased at 17.00% CAGR between FY16-FY21. Despite pandemic and lockdown, India has constructed 13,298 km of highways in FY21. In FY21, 13,298 kms of highway was constructed across India.

 

Government push towards Road Infrastructure

  1. National Infrastrcture pipeline – Rs. 111 lakh crore allocated for FY 2019-25 The roads sector is likely to account for 18% capital expenditure over FY 2019-25.
  2. India has a well-developed framework for Public-Private-Partnerships (PPP) in the highway sector. Asian Development Bank ranked India at the first spot in PPP operational maturity and also designated India as a developed market for PPPs.
  3. Bharatmala Pariyojana, –  aims to build 66,100 km of economic corridors, border and coastal roads, and expressways to boost the highway network.
  4. The market for roads and highways is projected to exhibit a CAGR of 36.16% during 2016-2025
  5. Almost 40% (824) of the 1,824 PPP projects awarded in India until December 2019 were related to roads.
  6. The highways sector in India has been at the forefront of performance and innovation. The government has successfully rolled out over 60 projects worth over $10 bn based on the Hybrid Annuity Model (HAM). HAM has balanced risk appropriately between private and public partners and boosted PPP activity in the sector.
  7. Data Lake and Project Management Software – NHAI has become ‘Fully Digital’, with the launch of unique cloud based and Artificial Intelligence powered Big Data Analytics platform. The entire project management work flow of NHAI is transformed from manual to online portal based, wherein the complete project execution operations including ‘workflow with time lines’ and ‘alert mechanism’ have been configured. All project documentation, contractual decisions and approvals are now being done through portal only.
  8. 2021-22 Budget recognises this need with a significant budgetary outlay for the road transport and highways sector of ₹1,18,101 crore

 

Bharatmala Project Components

Phase I—24,800 km of fresh roads and 10,000 km of roads subsumed from the National Highways Development Project—by 2022, at a cost of ₹5.35 lakh crore.

  • Economic Corridor –construction of 9000kms of Economic Corridors will be undertaken by the central government.
  • Feeder Route or Inter Corridor – of 6000km will be constructed.
  • National Corridor Efficiency Improvement – 5000kms of roads, constructed under the scheme will fall in the category of National Corridor for the better connection between roads.
  • Border Road and International Connectivity – for Connecting the cities and remote areas, which are situated in the border regions, (constructing 2000kms roads that fall in the Border Road or International Connectivity category).
  • Port Connectivity and Coastal Road – length 2000 km
  • Green Field Expressway – The main stress will be given on the construction and development of Green Field Expressway for better management of traffic and freight.
  • Balance NHDP Works – Under the last segment, the project will see construction and maintenance of about 10,000kms of new roads.

 

Challenges

  1. Land acquisition that can cost at least 25 to 30 percent of every project; there can be projects where it is even higher than the cost of construction. It not only escalates overall project costs, but also causes enormous delays :-
    • In a study conducted by NHAI on 106 projects, worth over ₹1.5 billion, facing implementation delays, issues pertaining to land acquisition were identified as one of the important causes for the delay in almost 50 percent of the projects. Besides, about 5 percent of these projects were delayed exclusively because of land acquisition issues
    • The government’s burden to acquire land has risen in compliance with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, that mandates it to pay four times the market value of acquired land in rural areas and two times in urban areas
  2. Development of the road network continues to be plagued by delays
      • over 800 road projects for a cumulative of more than 27,000 km, under the MoRTH, as being delayed.
      • Bharatmala Pariyojana – Phase I, which is crucial to coastal and port connectivity, and which was targeted to be completed in 2021-22 has been delayed to 2025-26, with both awards and completion under this project being far behind deadlines.
  3. MoRTH’s lack of any source of revenue other than budgetary support from the Central government and borrowings.
  4. Private participation could be challenging due to the continued stretched balance sheets of many infrastructure developers
  5. Very limited private sector participation in development of new roads and highways. This is driven by the financial profile of the developers, a lack of debt products that can be aligned to revenue models of highway projects as well as by delays in land acquisition, and an uncertain regulatory framework
  6. Since most of the projects are to be constructed in remote areas, mobilization of equipment and raw materials would be challenging. A slew of measures such as enhancement of approval limit of projects by the NHAI to Rs 2,000 crore from Rs 1,000 crore, increase in compensation rates to farmers under the new land acquisition policy and digitalization of land acquisitions would expedite projects under Bharatmala

 

Way forward

  1. Given the extent of capital commitment and outlay required to augment and maintain the road network over the next few years, there is a need to diversify sources of funds beyond budgetary allocation and borrowings by NHAI. This need for diversification becomes even more pronounced in the context of the nearly ₹97,000 crore debt service liability of NHAI over the next three financial years.
  2. NHAI’s Infrastructure Investment Trust (In VIT), which was approved in December 2019 will be launched soon. It also appears that NHAI’s operational toll roads, are likely to form a significant part of the national asset monetization program, with the Minister suggesting that NHAI plans to monetize ₹1,00,000 crore under the ToT model in the next 5 years.
  3. The newly announced DFI too will, hopefully, play a major role in making viable debt available for road network development.
  4. government should also revisiting its PPP models (including its HAM model) to attract more private sector investment in new asset development.
  5. implementation of Bharatmala would depend on fast tracking of land acquisitions, clearances from the Ministry of Environment, Forest and Climate Change and other clearances.
  6. Timely redressal of disputes by establishing a regulator is also crucial before undertaking such a large-scale project because of possible arbitration issues,

 

Eventually, strong transport infrastructure is essential to economic growth. A robust road network will be one important pillar in India’s speedy economic recovery and one would hope that the government’s budgetary commitment to strengthening roadway infrastructure is accompanied by attractive private investment opportunities in the sector.

 

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