ICRA Projects Five-Year Low in Road Construction Pace; NHAI Targets ₹40,000 Crore via Monetisation

India’s highway construction is expected to slow sharply in FY26, with rating agency ICRA projecting execution at just 25–26 km per day — the lowest in five years. The Ministry of Road Transport and Highways (MoRTH) is likely to complete only 9,000–9,500 km of roads during the year, down from the earlier estimate of 9,500–10,000 km.

The downward revision is attributed to weaker execution momentum in FY25, which was impacted by prolonged monsoon conditions and subdued project awards over the last two fiscal years. Road construction had already fallen 14% year-on-year in FY2025, slipping to 10,660 km from 12,349 km in FY2024.

Project awarding has also remained sluggish. MoRTH is estimated to have awarded only 8,000–8,500 km in FY2025, a significant drop compared to the activity seen between FY2021 and FY2023. However, ICRA expects awards to improve marginally to 9,000–9,500 km in FY2026, aided by recent ministerial directions.

The government has instructed implementing agencies to award new contracts only after securing 90% of the right-of-way, obtaining forest clearances, and finalising General Agreement Drawings (GADs) for bridges. ICRA has described this tightening of norms for EPC and Hybrid Annuity Model (HAM) projects as a positive move for execution discipline. However, it cautions that competition among contractors is unlikely to abate in the near term, given shrinking order books. A sustained pickup in project awards would be critical to easing pricing pressure and protecting margins.

On the revenue side, toll collections are expected to rise 5–8% in FY2026, supported by 3–4% growth in traffic and an annual toll rate hike of 2.3–4.0%.

Meanwhile, the National Highways Authority of India (NHAI) is preparing an aggressive asset monetisation pipeline to shore up funding. ICRA estimates the authority could raise ₹35,000–40,000 crore in FY2026 through Toll-Operate-Transfer (TOT) bundles and its Infrastructure Investment Trust (InvIT). This would take cumulative monetisation since inception to nearly ₹1.3 lakh crore — about 81% of the Centre’s ₹1.6 lakh crore National Monetisation Pipeline target for the highways sector.

The sector now awaits clarity on how swiftly tendering activity can rebound and whether execution can regain pace after the monsoon-affected slowdown.