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Published:May 9, 2018 3:22 PM
Execution and award of highway projects is expected to be even faster in 2019 and 2020 fiscal considering award of highway projects was 70% higher in the last fiscal, which valued INR 1.2 lakh crore for 7400 kms of length. It is really remarkable that contract awarding pace was slow in the first three quarters of FY2018, only at 1,700 km, but in last quarter most of the HAM projects were bid out. The speed of award and construction seen in the fourth quarter of FY18 is expected to remain the same or even higher for the first quarter of FY19 as many projects are already being tendered and are waiting to be awarded. Execution in fiscal 2018 up to January was 1,993 km, compared with 2,625 km for the whole of fiscal 2017, which is significant. Further, for FY2019, the government has set an ambitious target project award of 20,000 km which is lower than 25,000 km from last financial year but with special focus on Bharatmala, including NHDP, the award rate should be rising to 40,000 km for the next two years i.e. FY19 and FY20. At the present rate of a 17% yearly increase in projects awarded, around 71,000 km can be awarded by FY21. For the current fiscal, per day construction target has been fixed to 45 km. Average construction in FY18 was 27 km per day, where the government has increased per day construction target from 134 km to 167 km for rural area development and strengthening which is commendable and a positive sign. For current fiscal 2019, construction targets have been set at 16,420 km, of which 6,000 km will be constructed by NHAI, 9,700 km by MoRTH and 720 km by NHIDCL. Target road length of award and construction in FY19 Year Award Target (in kms) Construction Target (in kms) 2018-19 20000 16420 2017-18 17055 (Actual) 9829 (Actual) Source: MoRTH Special focus on NE For North Eastern states of Meghalaya, Manipur and Mizoram, the government has planned road-widening projects. The major focus is to improve the connectivity of the North Eastern states with the South-East Asian countries and to improve socio-economic condition of the region. The roads in Meghalaya are to improve the connectivity with Bangladesh through Dawki-Dalu and also to ease connectivity to Border Haats and South Garo Hill districts of the state. States yearly road construction spending goes up to INR 1,00,000 crore Currently, the combined spending of states on roads has reached INR 1,00,000 crore as against INR 35,000 crore in FY13. It is a positive sign that major states like Maharashtra, UP, MP, Telangana, and Karnataka would spend INR 5,00,000 crore over the next few years on new road construction and upgrades of existing roads. States like Maharashtra and MP have already started converting their state highways from bitumen to concrete. Major States’ spending plans for roads States INR Crore Maharashtra 108800 MP 150000 UP 149000 Andhra pradesh 55300 Telangana 42400 Karnataka 6700 Total Expected Spending 512200 Source: Infraline Analysis, MoRTH For FY19, project award is expected to remain robust, with hybrid annuity projects dominating the total project cost as 63 percent of the cost of projects awarded in FY18, for EPC it was 35 percent and 2 percent share on BOT. INR 1.4 trillion is expected to be invested in national highways up to Fiscal 2022 through HAM only. NHAI achieves highest-ever awarding in FY18 NHAI achieved its best-ever performance In 2017-18 by awarding 7,400km of projects, which is much higher than previous FY17 award of 4,300km (past five years average of 2,860km). Even projects awarded cost in FY18 is nearly double that of FY17. Since the announcement of the Bharatmala programme in October 2017, bids for 232 projects spanning 11,200km have been invited, with high increase in number of vehicles and traffic.. Award of projects to remain robust in FY19 Uncertainty related to GST had led to unresponsive project award till November 2017. NHAI had awarded only 670km projects during April-October 2017. However, post announcement of the Bharatmala programme, tendering and awarding of projects went up significantly. Putting in a new system by the government awarding activity was also aided for the project sanctioning in November 2017. Under this, the NHAI board was delegated full powers for sanctioning EPC projects, following which a high powered Cost Committee and Projects Appraisal Committee were put in place in NHAI. Also steps were taken to expedite land acquisition along with putting strong monitoring mechanisms in place. Good times ahead for major players Robust award has led to momentous progress in order books of road companies. Book-to-bill for most players is amongst the maximum over the past few years especially after introduction of hybrid annuity model. With project award expected to remain strong in FY19, we can hope the road sector will continue to attract significant investments in coming future with benefiting road-focused construction/contracting, tolling, cement, heavy equipment and consulting companies. Summary report for Hybrid Annuity Projects (As on 28th Feb 2018) Scheme Balance for Award Awarded Completed No. of Projects Length (km) Total Project Cost (Cr.) Awarded Cost (Cr.) Length (km) No. of Projects NHDP-II 0 0.00 0.00 19.00 1 NHDP-VII 1 28.10 0.00 2723.00 0.00 0 Others 3 105.81 3544.25 1367.00 0.00 0 NHDP-VI 1 262.00 16000.00 3888.10 0.00 0 NH(O) 12 730.35 15860.16 1065.51 0.00 0 NHDP-III 8 481.58 3877.00 2805.00 0.00 0 Bharat Mala 14 847.56 14638.96 0.00 0.00 0 NHDP-V 5 411.29 8997.00 7160.00 0.00 0 NHDP-IV 17 733.29 13089.24 16350.42 0.00 0 Total 61 3599.98 76006.61 35359.03 19.00 1 Source: NHAI Total Investment by NHAI (INR Crore) Major Heads Actual 2016-17 Revised 2017-18 Budget 2018-19 BE 2018-19/RE 2017-18 Road Works 44463 36780 40881 11% NHAI 7500 23892 29663 24% Road transport and safety 1127 171 315 84% Others 144 158 141 -11% Total 52232 61000 71000 16% BE – Budget Estimate; RE – Revised Estimate Source: PRS India
Execution and award of highway projects is expected to be even faster in 2019 and 2020 fiscal considering award of highway projects was 70% higher in the last fiscal, which valued INR 1.2 lakh crore for 7400 kms of length. It is really remarkable that contract awarding pace was slow in the first three quarters of FY2018, only at 1,700 km, but in last quarter most of the HAM projects were bid out.
The speed of award and construction seen in the fourth quarter of FY18 is expected to remain the same or even higher for the first quarter of FY19 as many projects are already being tendered and are waiting to be awarded. Execution in fiscal 2018 up to January was 1,993 km, compared with 2,625 km for the whole of fiscal 2017, which is significant.
Further, for FY2019, the government has set an ambitious target project award of 20,000 km which is lower than 25,000 km from last financial year but with special focus on Bharatmala, including NHDP, the award rate should be rising to 40,000 km for the next two years i.e. FY19 and FY20. At the present rate of a 17% yearly increase in projects awarded, around 71,000 km can be awarded by FY21.
For the current fiscal, per day construction target has been fixed to 45 km. Average construction in FY18 was 27 km per day, where the government has increased per day construction target from 134 km to 167 km for rural area development and strengthening which is commendable and a positive sign.
For current fiscal 2019, construction targets have been set at 16,420 km, of which 6,000 km will be constructed by NHAI, 9,700 km by MoRTH and 720 km by NHIDCL.
Target road length of award and construction in FY19
Year
Award Target (in kms)
Construction Target (in kms)
2018-19
20000
16420
2017-18
17055 (Actual)
9829 (Actual)
Source: MoRTH
Special focus on NE
For North Eastern states of Meghalaya, Manipur and Mizoram, the government has planned road-widening projects. The major focus is to improve the connectivity of the North Eastern states with the South-East Asian countries and to improve socio-economic condition of the region. The roads in Meghalaya are to improve the connectivity with Bangladesh through Dawki-Dalu and also to ease connectivity to Border Haats and South Garo Hill districts of the state.
States yearly road construction spending goes up to INR 1,00,000 crore
Currently, the combined spending of states on roads has reached INR 1,00,000 crore as against INR 35,000 crore in FY13. It is a positive sign that major states like Maharashtra, UP, MP, Telangana, and Karnataka would spend INR 5,00,000 crore over the next few years on new road construction and upgrades of existing roads. States like Maharashtra and MP have already started converting their state highways from bitumen to concrete.
Major States’ spending plans for roads
States
INR Crore
Maharashtra
108800
MP
150000
UP
149000
Andhra pradesh
55300
Telangana
42400
Karnataka
6700
Total Expected Spending
512200
Source: Infraline Analysis, MoRTH
For FY19, project award is expected to remain robust, with hybrid annuity projects dominating the total project cost as 63 percent of the cost of projects awarded in FY18, for EPC it was 35 percent and 2 percent share on BOT. INR 1.4 trillion is expected to be invested in national highways up to Fiscal 2022 through HAM only.
NHAI achieves highest-ever awarding in FY18
NHAI achieved its best-ever performance In 2017-18 by awarding 7,400km of projects, which is much higher than previous FY17 award of 4,300km (past five years average of 2,860km). Even projects awarded cost in FY18 is nearly double that of FY17. Since the announcement of the Bharatmala programme in October 2017, bids for 232 projects spanning 11,200km have been invited, with high increase in number of vehicles and traffic..
Award of projects to remain robust in FY19
Uncertainty related to GST had led to unresponsive project award till November 2017. NHAI had awarded only 670km projects during April-October 2017. However, post announcement of the Bharatmala programme, tendering and awarding of projects went up significantly.
Putting in a new system by the government awarding activity was also aided for the project sanctioning in November 2017. Under this, the NHAI board was delegated full powers for sanctioning EPC projects, following which a high powered Cost Committee and Projects Appraisal Committee were put in place in NHAI. Also steps were taken to expedite land acquisition along with putting strong monitoring mechanisms in place.
Good times ahead for major players
Robust award has led to momentous progress in order books of road companies. Book-to-bill for most players is amongst the maximum over the past few years especially after introduction of hybrid annuity model. With project award expected to remain strong in FY19, we can hope the road sector will continue to attract significant investments in coming future with benefiting road-focused construction/contracting, tolling, cement, heavy equipment and consulting companies.
Summary report for Hybrid Annuity Projects (As on 28th Feb 2018)
Scheme
Balance for Award
Awarded
Completed
No. of Projects
Length (km)
Total Project Cost (Cr.)
Awarded Cost (Cr.)
NHDP-II
0
0.00
19.00
1
NHDP-VII
28.10
2723.00
Others
3
105.81
3544.25
1367.00
NHDP-VI
262.00
16000.00
3888.10
NH(O)
12
730.35
15860.16
1065.51
NHDP-III
8
481.58
3877.00
2805.00
Bharat Mala
14
847.56
14638.96
NHDP-V
5
411.29
8997.00
7160.00
NHDP-IV
17
733.29
13089.24
16350.42
Total
61
3599.98
76006.61
35359.03
Source: NHAI
Total Investment by NHAI (INR Crore)
Major Heads
Actual 2016-17
Revised 2017-18
Budget 2018-19
BE 2018-19/RE 2017-18
Road Works
44463
36780
40881
11%
NHAI
7500
23892
29663
24%
Road transport and safety
1127
171
315
84%
144
158
141
-11%
52232
61000
71000
16%
BE – Budget Estimate; RE – Revised Estimate
Source: PRS India
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