The construction of highways reached an all-time average growth of 27km per day in FY18. India has a total length of 176,166 km State Highways, 115,530 km of National highways and 5,326,166 km of District and Rural Roads. With one of the largest road network of 5.5 million km, India’s road network transports 64.5% of all goods in the country and 90% of passengers use road transport to commute. The density of India’s highway network - at 0.66 km of roads per square kilometer of land – is similar to that of the United States (0.65) and much greater than China's (0.16) or Brazil's (0.20).
A total of 47,447 km length of roads were constructed in FY18 under (Pradhan Mantri Gram Sadak Yojana) PMGSY. The industry’s net profit declined 64% year-on-year, while net profit margin fell 633 bps to 2.7% in FY18. During April-August 2018, 2345 km of national highways were constructed.
According to National Investment Promotion and Facilitation Agency, 17,055 km road length was awarded during 2017-18, as against 15,948 km in the previous year. 742 out of the 1,531 (Public Private Partnership) PPP projects awarded until March 2018, were related to roads. During April 2018- August 2018, contracts for a total of 892 km national highway projects were awarded.
Asian Development Bank(ADB) Financed Projects: Contracts awarded to Madhya Pradesh Road Development Corporation Ltd. were worth US$ 61.7 million for widening and reconstruction of roads in the non-urban transport sector under ADB, during April-August 2018. Out of the total contract amount, 73.3% is to be financed by the ADB. Further, whilst the Ministry of Railways was awarded contracts worth US$ 11.8 million (56.5% financed by ADB) for the construction of roadbed bridges, track linking etc. The Ministry of Rural Development was sanctioned US$ 82.8 by ADB for contracts worth US$ 198.7 million for rural connectivity investment, during the same period.
South Asia Subregional Economic Cooperation (SASEC) Road Connectivity Investment Program financed Asian Highway 1 (AH1), connecting Myanmar from Manipur State in India. It also financed an international bridge between India and Nepal, as a final upgradation of Asian Highway 2 (AH2), extending 500km of roads, enabling efficient and safe transport within India and regionally, with SASEC member countries. The project's second tranche will upgrade about 66 km of national highways in Manipur, construct approximately 1.5 km of an international bridge between India and Nepal, and provide additional financing for the construction of 103 km stretch of a state highway in Manipur.
NHAI awarding of contracts in H1 FY19 has been low, however it is higher than H1 FY18. Contract awarding is expected to pick up in H2, especially in Q4 of FY19. EPC constituted about 51% of the total length awarded in FY18 and Hybrid-Annuity Model (HAM)1 constituted 46%. The share of Engineering, Procurement and Construction (EPC) was just 34% in FY17.
100 % FDI is allowed under automatic route, subject to applicable laws and regulations. An investment worth Rs. 9681.5 crore under (Toll-Operate-Transfer) TOT mode was made by MAIF2 (Macquarie Asia Infrastructure Fund) during April 2018 in the road sector. World Bank has also extended support of US$710 million for transforming rural connectivity in Madhya Pradesh during March 2018.
Foreign Direct Investments
The trend line of total investments is expected to move upward at a greater pace as compared to previous five years with Government’s continuous focus on infrastructure related projects. By the end of FY2019, the projects awarded in this sector are expected to be 7600km. During the next 5 years, the PPPs are expected to be in the range of US$31 billion for National Highways.
The Government, through a series of initiatives, is working on policies to attract significant investor interest. A total of 200,000 km national highways are expected to be completed by 2022. The Government of India has decided to invest Rs 7 trillion (US$ 107.82 billion) for construction of new roads and highways over the next five years.