Awarding of road construction contract falls to 229 km in June

Road awards by the National Highways Authority of India (NHAI) and Ministry of Road Transport & Highways (MoRTH) combined fell to 229 kilometres (km) in June, from 268 km in May and 473 km in June 2022, Nuvama Institutional Equities said in a note.

The slowdown comes after a blockbuster awarding in March, after which the NHAI halted project awards with no Letters of Awards (LoAs) getting issued in April and May. However, three projects spanning 87 kilometres were awarded in June.  As per Nuvama, the combined awarding by NHAI and MoRTH in March 2023 stood at around 4600 km.

In terms of construction, both organisations together constructed 785 km of roads during June, compared to 659 km in June 2022 and 924 km in May 2023.

The combined awarding in fiscal year 2023 (FY23) stood at 12,375 km, compared to 12,731 km in FY22, of which the NHAI awarded 6,310 km.

The slowdown in NHAI’s awarding activity comes as the government is looking to increase its road construction targets to 14,000  kilometres  from 12,500  kilometres,  at a pace of 38  kilometres  per day. In FY23, the NHAI constructed 4,500–4,600  kilometres  of roads, versus 4,325  kilometres in FY2022, at a pace of 12.5  kilometres  per day.

While commodity prices have softened, high competition remains an issue, with knock-on effects on margins. However, a 25% higher year-on-year budgetary outlay for the current fiscal year, the RBI's pause in interest rate hikes, the government’s thrust on roads, and the improvement in credit availability from banks are encouraging factors, the report said.