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Industry & Sectors

Roads and Highways

Last Updated: October, 2016

Introduction

India has the second largest road network across the world at 4.7 million km. This road network transports more than 60 per cent of all goods in the country and 85 per cent of India’s total passenger traffic. Road transportation has gradually increased over the years with the improvement in connectivity between cities, towns and villages in the country.

The Indian roads carry almost 90 per cent of the country’s passenger traffic and around 65 per cent of its freight. In India sales of automobiles and movement of freight by roads is growing at a rapid rate. Cognizant of the need to create an adequate road network to cater to the increased traffic and movement of goods, Government of India has set earmarked 20 per cent of the investment of US$ 1 trillion reserved for infrastructure during the 12th Five-Year Plan (2012–17) to develop the country's roads.

Market size

The value of roads and bridges infrastructure in India is projected to grow at a Compound Annual Growth Rate (CAGR) of 17.4 per cent over FY12–17. The country's roads and bridges infrastructure, which was valued at US$ 6.9 billion in 2009 is expected to touch US$ 19.2 billion by 2017.

The construction of highways had reached an all-time high of 6,029 km during FY 2015-16, and the increased pace of construction is expected to continue for the coming years.

The financial outlay for road transport and highways grew at a CAGR of 12.5 per cent between FY2010-2016.The plan outlay for FY2016-17 stepped up budgetary support for Road Transport and Highways to Rs 97,000 crore (US$ 14.46 billion).

Key Investments/Developments

Some of the key investments and developments in the Indian roads sector are as follows:

  • Power Finance Corporation Limited (PFC) has provided a financial assistance of Rs 13 crore (US$ 1.94 million) and collaborated with National Green Highways Mission (NGHM) under National Highways Authority of India (NHAI) for plantations work on NH7 in Nagpur region under their ‘Adopt a Green Highways’ Program.
  • Indian Institute of Technology, Kharagpur (IIT-Kharagpur) and National Highways Authority of India (NHAI) have signed a Memorandum of Understanding (MoU) for research project to develop technology to construct maintenance free highways in India.
  • Mr Nitin Gadkari, Minister of Road Transport and Highways, and Shipping, has announced the government’s target of Rs 25 trillion (US$ 372.8 billion) investment in infrastructure over a period of three years, which will include Rs 8 trillion (US$ 119.3 billion) for developing 27 industrial clusters and an additional Rs 5 trillion (US$ 74.56 billion) for road, railway and port connectivity projects.
  • National Highways Authority of India (NHAI) plans to invest around US$ 250 billion in 240 road projects spanning 50,000 kms over the next five to six years, as per Mr Raghav Chandra, Chairman of NHAI.
  • The National Highways Authority of India (NHAI) has signed a MoU with the National Remote Sensing Centre (NRSC) under Indian Space Research Organisation (ISRO) and North East Centre for Technology Application and Research (NECTAR) to use spatial technology such as satellite data to monitor and manage national highways.
  • The Government of India plans to award 100 highway projects under the Public-Private Partnership (PPP) mode in 2016, with expectations that recent amendments in regulations would revive investor sentiments in PPP projects in the infrastructure sector.
  • The Ministry of Road Transport and Highways has undertaken development of about 7,000 km of national highways under BharatmalaPariyojana at an estimated cost of Rs 80,000 crore (US$ 11.93 billion) in consultation with state governments. National Highways Authority of India (NHAI) has invited bids for preparing Detailed Project Reports (DPRs) for road development along the borders and coast lines under the Bharat Mala project.
  • The Cabinet Committee on Economic Affairs (CCEA) has permitted 100 per cent equity divestment by private developers after two years of construction completion for all Build–Operate–Transfer (BOT) projects, irrespective of the year of award of the project.
  • The Union government approved the construction of around 1,000 km of expressways at acost of Rs 16.68 crore (US$ 2.49 million) on a design-build-finance-operate-transfer (DBFOT) mode. The approved corridors are Delhi-Chandigarh (249 km), Bengaluru-Chennai (334 km), Delhi-Jaipur (261 km) and Vadodara-Mumbai (400 km). The government will also take up the development of 135 km long Eastern Peripheral Expressway at an estimated cost of Rs 5,763 crore (US$ 859.34 million).

Government Initiatives

Some of the recent developments are as follows

  • The Ministry of Road Transport and Highways and National Highways Authority of India (NHAI) plan to take up 82 highway development projects under the Bharatmala project, which would help in improving connectivity to both major as well as minor ports in the country.
  • The Government of India plans to invest Rs 3 trillion (US$ 44.73 billion) for developing 35,000 km of roads across the country, of which 21,000 km will be economic corridors and 14,000 km will be feeder routes, which is expected to improve freight movement, ease traffic bottlenecks and improve inter-city connectivity in the country.
  • A panel set by Government of India has cleared 16 highway projects worth Rs 7,456 crore (US$ 1.11 billion) for bidding in 11 states, totalling a length of 622 kilometer (km), including the construction of new roads, widening and expansion of existing highways, and rehabilitation and upgrade of some projects.
  • The Government of India is looking at bundling public-funded national highway projects that can be monetised by leasing out to private players for toll collection, which would enable the concessionaire to achieve economies of scale, synergy in operations and achieve an appropriate investment size.
  • The Government of India plans to introduce a new framework on renegotiation of Public Private Partnership (PPP) contracts, which will allow renegotiations based on sector-specific issues, especially for national highways and ports, and provide greater flexibility to the parties involved.
  • The National Highways Authority of India (NHAI) seeks to improve execution of highway projects by delegating powers to its Regional Officers (RO) for hiring of equipment and labourers to demolish structures falling within the project, which will enable NHAI to make encumbrance free land available more speedily to the concessionaire/contractors.
  • The Ministry of Road Transport and Highways plans to set up Land Acquisition (LA) cells across the country, which will work towards resolving issues related to land acquisition and ensure speedy compensation disbursal by the state governments.
  • The Ministry of Road Transport and Highways plans to build five more greenfield expressways across the country, which are expected to reduce travel time and propel economic growth.
  • Mr Nitin Gadkari, Minister of Road Transport and Highways, and Shipping has said that the government has accelerated the construction of highways and expects the revival of investments in infrastructure sector to contribute more than 2 percentage points to the country’s Gross Domestic Product (GDP) in the next two years and to create five million jobs.
  • The Cabinet Committee on Economic Affairs (CCEA) has approved a hybrid annuity model for implementing highway projects, which adopts a more rational approach to allocation of risks between the government and the private developer, and is hence expected to revive highway projects construction in India.        
  • India and Japan are planning to enter into a partnership and launch an infrastructure finance company which will provide soft loans for Indian road projects with a credit target of Rs 2 lakh crore (US$ 29.82 billion).
  • The Cabinet Committee on Economic Affairs (CCEA) has approved a one-time fund infusion in road projects which are at least 50 per cent complete till November 2014, but have not progressed further because of shortage of funds.
  • Minister for Roads, Transport and Highways Mr Nitin Gadkari announced that the government is planning a compensation policy for road sector developers, which will seek to compensate companies for any delays related to clearance for road projects.
  • With the objective of reviving private investment in the roads sector, the Ministry of Roads and Highways is now working on two more models for attracting capital. One model proposes allowing bidding of a road project on the basis of the least present value, and the other envisages selling off road projects that have been built using government funds.
  • The Indian government plans to set up a finance corporation with an amount of Rs 1 trillion (US$ 14.82 billion), in collaboration with Japanese investors, to fund projects in the roads segment.

Road Ahead

The government, through a series of initiatives, is working on policies to attract significant investor interest. The Indian government plans to develop a total of 66,117 km of roads under different programmes such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE), and has set an objective of building 30 km of road a day from 2016.

Exchange Rate Used: INR 1 = US$ 0.0149 as on September 21, 2016

References: Media Reports, Press Releases, Ministry of Road Transport and Highways, NHAI website, Press Information Bureau (PIB), Budget 2016-17

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