The Central Government has been taking steps to improve road connectivity due to which the road network is getting strengthened rapidly. Your take on the future of the sector?
Road sector continues to take the centre stage when it comes to attracting FDI in the Indian infrastructure sector. Over the last five years or so we have witnessed unprecedented momentum in the investment activity with the long term financial investors including leading pension and sovereign funds consolidating their position through incremental investment in the Indian road sector. While the expectations are set high in terms of Capex and aggressive targets for execution and delivery (more than 50 km per day in FY23), capacity building towards enhancing project appraisal skills and project management will hold the key in terms achieving the aspirational targets. Overall the future looks promising at the back drop of robust execution track record built over the last few years despite the Covid disruption.
What are the projects of interest that are likely to transform the pace and face of roads & highways in the country?
Road sector contributes to a sizeable 18% of the National Infrastructure Pipeline announced by GoI. Given the huge potential to drive the construction sector and being cognisant of the fact that Road sector can play a huge role in addressing the overall unemployment issues, there are some massive projects announced by the Government. To mention a few, the Special Accelerated Road Development Programme for the Northeast region (SARDP-NE) aimed at developing road connectivity between remote areas in the northeast, Implementation of the road development programme to improve connectivity of 88 district headquarters across states in the Northeast to their nearest national highway. Another aspirational project under Phase-I of Bharatmala Pariyojana includes implementation of 34,800 km of NHs with an outlay of Rs. 5,35,000 crore. Under this scheme, 22 greenfield projects (8,000 kms length) are being constructed worth Rs. 3.26 lakh crore. While the list of new projects being launched is a long one, however the vision to improve connectivity in difficult terrains of North East and J&K is commendable as it requires innovative means of financing by the Authorities due to their limited viability.
How do you see the sector recovering from the pandemic impact?
Supply chain was disrupted big time during the first wave of Covid outbreak along with shortage of labour for about 6-9 months. However, the sector has bounced back over the last 12-15 months with record execution (more than 40-km per day) being registered during FY21. Both Traffic growth and Toll collection have also seen a phenomenal growth since the pandemic outbreak, hence it is fair to say that there is not much of a drag one is witnessing due to Covid anymore. However, there has been an impact on the input cost primarily related to raw material costs (Steel, Bitumen, Cement) due to recent changes in geo political scenario and this may have an immediate impact on the cost of execution of projects in the near future.
What are the notable government initiatives that are likely to add to the pace of development of the sector?
There has been an extensive effort by the Government to lay out conducive policies and strengthen regulatory framework to bring back Private sector investment in the road sector. These measures range from the recent cut down on GST on the construction equipment, relaxing exit/equity dilution norms, firming up stringent clauses related to ROW handover, accelerating the compensation to land owners and expediting the process of dispute resolution with developers through streamlining arbitration and conciliation process. It is also refreshing to note that the Government has reoriented its focus on asset monetisation (through TOT, InVIT, etc) which effectively improves the financial bandwidth of entities like NHAI to come up with more greenfield projects and leverage on innovative models like HAM to roll out projects using their own balance sheet.