National Highways construction to decline by 7-10% to 31 km/day in FY25: CareEdge Ratings

The pace of National Highways construction in India is estimated to slow down by 7-10 per cent to around 31 km/day in the current fiscal due to heightened execution challenges, CareEdge Ratings said on Tuesday.

The pace of National Highways construction in India during FY24 registered a healthy uptick of 20 per cent to 34 km/day. "CareEdge Ratings expects National Highways Construction to slow down from 12,350 km in FY24 to 11,100-11,500 km in FY25," it said.

However, according to the rating agency, despite the uptick, the pace of construction fared lower than 37 km per day reported in FY21 due to execution woes and an increasingly competitive landscape.

It said BOT (build, operate and transfer)-HAM remained the preferred mode of award, constituting around 55 per cent of the total projects awarded during FY21-24.

Under the HAM model, the government provides 40 per cent of the project cost to the developer to start work, while the remaining investment are made by the contractor.

CareEdge Ratings said of the overall sample of HAM projects awarded after March 2020 amounting to Rs.1.50 lakh crore, approximately one-third of the projects with an aggregate bid project cost (BPC) value of Rs 50,000 crore are facing delays, ranging from 4-6 months beyond the grace period of three months. These projects have applied or received an extension of time (EOT) of a similar or longer period, it added.

According to the rating agency, of the total awards of 12,300 km by the National Highways Authority of India (NHAI) in FY22 and FY23, 20 per cent continue to await the appointed date for more than one year.