Pace of road con­struc­tion to slow down in FY20 due to funds short­age: CARE

Tardy ac­qui­si­tion of land by NHAI may also be a con­tribut­ing fac­tor

The Hindu Business Line - - NEWS - KSE­NIA KONDRATIEVA BLOOMBERG

Road con­struc­tion pace may peak in the sec­ond half of the cur­rent fis­cal due to elec­tions push.

How­ever, go­ing for­ward, it is likely to slow down to the lev­els of FY18, or worse, as more than 340 projects, half of which are un­der the Bharat­mala scheme, are stuck at pre-award­ing stage with­out hav­ing re­ceived the ap­pointed date, CARE has said in a re­port.

The lim­ited avail­abil­ity of fund­ing for new projects, as well as NHAI’s slow progress on land ac­qui­si­tion for award­ing new projects un­der EPC and hy­brid an­nu­ity model (HAM) mod­els will lead to the slow the pace of road con­struc­tion, it added.

“The over­all pace of con­struc­tion is ex­pected to de­cline in FY20 on ac­count of fund­ing short­age for new projects. Fund­ing will be con­strained by the lim­ited num­ber of banks which are out­side the Pre­ven­tive Cor­rec­tive Ac­tion (PCA) frame­work, and can lend.

Fur­ther, tight liq­uid­ity sit­u­a­tion in the NBFC space will con­strain fu­ture lend­ing. The bud­getary sup­port may not be able to com­pen­sate for this short­fall,” the re­port noted.

Sud­den peak

Ac­cord­ing to CARE’s anal­y­sis, there was a slow­down in the con­struc­tion pace to 23 km per day (as against 27 km per day for FY18) for the first seven months of the cur­rent fi­nan­cial year, due to mon­soons and sea­sonal dis­rup­tion.

How­ever, in the fol­low­ing four months of FY19, the pace could peak at 30-32 km per day.

While the re­port did not spec­ify the rea­son for sud­den in­crease in con­struc­tion pace, More than 340 projects are still in award­ing stage

in­dus­try sources be­lieve elec­tions are the likely cause.

The gov­ern­ment is at­tempt­ing to mon­e­tise ex­ist­ing road projects to meet the ex­cess cap­i­tal re­quire­ments, which will fund new projects.

In ad­di­tion, the first bun­dle of high­ways un­der the toll-op­er­ate-trans­fer (TOT) model has fetched ₹9,861 crore (1.5 times more than the es­ti­mate).

But CARE an­a­lysts be­lieve the “scope to raise funds

through this medium may be short term and has lim­ited prospect”.

Land ac­qui­si­tion

The CARE re­port also noted that while the gov­ern­ment has set high tar­gets for high­ways con­struc­tion and new projects award, NHAI’s progress in land ac­qui­si­tions has stalled “due to sharp rise in av­er­age cost of land ac­qui­si­tion by around 300 per cent, over the last four years on an av­er­age”.

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