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ICRA has revised its forecast of road awards by the Ministry of Road Transport and Highways (MoRTH) in FY24 to 7,000-7,500 km, a y-o-y decline of 40-43 per cent from its earlier estimate of 9,000-9,500 km.
“In 7M FY24, road awards stood at 2,595 km, 48 per cent lower than 5,007 km awarded in 7M FY2023. If the model code of conduct for the General Elections comes into effect in Q4 FY24, the awarding activity is likely to get further curtailed, as the month of March typically accounts for 40-45 per cent of awards in a year,” ICRA said.
Nonetheless, ICRA highlighted that road execution has remained strong and is likely to increase by 16-21 per cent on a y-o-y basis to 12,000-12,500 km in FY24 amid a sizeable backlog owing to healthy awards in the last few years, increased capital outlay by the Government of India, and a focus on completion of projects ahead of the General Elections, it added.
ICRA Sector Head Corporate Ratings, Vinay Kumar G, said: “Pending the Cabinet approval for the revised cost of Bharatmala Phase-l, project awarding activity in the recent quarters has taken a beating.”
While Engineering, Procurement, and Construction (EPC) is likely to remain the preferred route of road awards for MoRTH, it is gradually shifting its focus to Build, Operate, and Transfer (BOT) (Toll) projects, given the lower funding support required from the Ministry in BOT-Toll mode, he added.
“BOT-Toll awards accounted for less than 5 per cent of the orders in the last five years, and its share is expected to remain at a similar level in FY24. Although NHAI has identified around 900 km of highway stretches to be awarded under BOT (Toll) in FY24, the major part of these stretches is likely to be spilled over to FY25,” Vinay Kumar said.
Road execution has improved by 10.2 per cent to 4,474 km in 7M FY24 from 4,060 km in 7M FY2023, owing to the government’s focus on execution and higher budgetary allocation.
“The Ministry has spent 64 per cent of the total outlay of Rs 2.59 lakh crore till 7M FY24. A healthy pipeline of under-construction projects of 43,856 km as of October 2023, along with the focus on project completion ahead of the General Elections, is expected to increase road execution to 12,000-12,500 km in FY24,” he added.
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