Thursday, May 23, 2024

Highway construction has sped up, not slowed down, in election season: Officials

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In just the first month of the fiscal year, more than 20% of the 2,72,241 crore of the capex allocated to the ministry of road transport and highways (MoRTH) in the budget has been spent. In the previous fiscal year, this level of spending was achieved only by the end of May. In FY24, the total capex outlay for MoRTH stood at 2,58,606 crore and actual expenditure at the end of May stood at 59,078 crore, or just over 22% of the outlay.

An official at the ministry, who did not wish to be named, said, “This year we are moving even more quickly to allocate capex for infrastructure development. Spending plans by road-development agencies were sought from the very first day of the new fiscal year and and disbursal also started from 1 April. This momentum will be maintained in the first quarter of FY25, before the monsoon slows down construction activity.”

The plan, this official added, is to spent almost 40% of budgeted funds by the end of the June quarter, which would be a record for the ministry. The move will help the new government in June to better plan infrastructure development over the rest of the fiscal year, the official said.

Also read: RBI’s new rules have road ministry worried for its grand highway plans

According to MoRTH data, it built 483 km of national highways in April FY25, compared to 523 km in April FY24. However, actual expenditure was 54,545 crore in the first month of the fiscal, or 20.04% of the budgeted capex of 2,72,241 crore ( 2.72 trillion). In FY24, the ministry had spent about half that amount by this point.

“[Contrary to] the wider perception that elections slow the pace of road construction, this year we will see more projects completed in Q1. The model code of conduct is in force until a government is formed, and this time is being used to finalise detailed project reports of new highway alignments that will help maintain the pace of construction during FY25,” the official added.

Queries sent to the  ministry did not elicit an immediate response.

‘Fundamentals remain strong’

Srishti Ahuja, partner, investment banking, EY, said that despite disruptions caused by the elections, fundamentals remain strong and could further boost the sector this year.

“… the sector will see a significant amount of investment as MoRTH has improved the concession framework for BOT (build-operate-transfer) and TOT (toll-operate-transfer) projects. These changes improve the risk-return framework for private-sector companies. I expect large infra funds and yield investors to commit more capital to mature assets. Domestic players will continue focus on greenfield build-outs, which they will monetise.” 

Also read: Road ministry blames Union cabinet for delay in awarding of highway contracts

Minitry officials said the large pipeline of projects will ensure that construction activity remains close to FY24 levels even in FY26.

In FY24, the government built 12,349 km of highways, second only to the 13,327 km built in covid-hit FY21. Highway construction picked up in FY24 from the previous two years, as MoRTH used its entire budgeted capex. It was also the first time that actual expenditure was 99.93% of the revised capex budget of 2,64,526 crore.

Officials said MoRTH’s capex has been more than 90% of the outlay in the previous five years, and more than 98% in three of them. The exceptions were FY20 (91%) and FY22 (93%). They added that the ministry expects to spend the entire 2,72,241 crore of capex budgeted for building highways in FY25.

Also read: Road ministry to end disputes with contractors, unlock blocked investments

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Published: 15 May 2024, 01:57 PM IST

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