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Published:Friday, August 16, 2019 4:34 PM

Investment Opportunity for Private Players In the Sector

Investment Opportunity for Private Players In the Sector

 The Indian Road sector has shown signs of revival over FY2015-FY2018, the government has aptly focused on addressing and resolving the bottlenecks for the road sector, with measures like rescheduling of premium, providing exits to concessionaires, restructuring of loans, providing more avenues of financing, improving liquidity, and change in model concession agreements and faster clearances of projects.

Development of road can be bifurcated under various phases like, National Highways Development Project (NHDP), Special Accelerated Road Development Programme specifically for the North East Region (SARDP-NE) including Arunachal Pradesh Package of Roads, Development of Roads in the Left Wing Extremism affected parts, Externally Aided Projects (EAP) etc. 
There are projects worth around Rs 70,000 crore that are yet to be awarded.
Investment Opportunities in the Sector
Massive Pipeline Of Opportunities Over Next Five Years (NHAI)
Length (in kms)
3 tn
770 bn
1.1 tn
Time Period
Award Over 5Yrs
Award Over 15-18 Months
Award Over 5Yrs
NHAI Projects Worth 30,000km (Rs 5tn) Likely To Be Awarded Over FY20E-FY24E*
States yearly road construction spending touches INR 1,00,000cr
Currently, the combined spending of states on roads has reached INR 1,00,000cr as against INR 35,000 cr in FY13. Our analysis suggests that major states like Maharashtra, UP, MP, Telangana, and Karnataka would spend INR 5,00,000cr over the next few years on new road construction and upgrades of existing roads. States like Maharaashtra and MP have already started converting their state highways from bitumen to concrete.
Major State's Spending Plans for Roads
Andhra Pradesh
Total Expected Spending 
Source: Infraline Analysis, MoRTH
Significant policy amendments to revive growth
Several policies were amended to remove bottlenecks and achieve MORTH ambitious target of doubling yearly construction.
Key initiatives
  • Amendment to the Model Concession Agreement (MCA)
  •  Increased land acquisition prices
  •  Fast-track judgments related to arbitration and early disbursement of 75% of the amount
  • Making exit options available to developers after two years of project operation
  •  Correctly worked out utility estimates is to be obtained at the earliest after the alignment finalization and shall form part of appraisal proposal.
  • The procedure of project appraisal should begin at the earliest on receipt of the Final Detailed Project Report (DPR) and Technical schedules.
  •  Regular review at various levels, proposed exit for Equity Investors
  •  Securitization of road sector loans
  •  Rationalize compensation for delays attributed to authority
Road Ahead
District and Rural roads shares around 95% of the total length. Here state highways cover close to 3% of the road length while the remaining 2% share contributed by National Highways. Recently Asian Development Bank (ADB) has approved a USD 200 million loan for improving road infrastructure in 34 districts of Maharashtra where rural road will be upgraded to all weather connectivity road which will help to boost connectivity between local roads to economic centers.
This is a big number when it comes to passenger traffic uses of road transport which is nearly 90% of total traffic, for goods transport this number is 64.5%. Road transportation has steadily increased over the past many years with the improvement in connectivity between cities, towns and villages in the country.
India should follow systematic approach towards highway development with the tiered approach like China which enabled it to develop fast paced road network. There should be different departments for planning, executing and monitoring of road sector, so the sector will be able to attract more investment and funding in near future. 

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