MUMBAI: The excess monsoons in most parts of the country and the delayed awarding of projects are likely to slow down road construction to a five year low of 25-26 km per day—massively down from the 37 km/per day executed in FY21, according to a report.
The anticipated slowdown follows a 14% on-year drop, where execution fell to 10,660 km in FY25 from 12,349 km in FY24. Concurrently, project awarding by the road transport and highways ministry in FY25 is flat on-year at 8,000-8,500 km, significantly lower than the lengths of contracts between FY21 and FY23, Icra Ratings said in a report.
“Given these, we see significant slowdown in road construction, to a low execution level of 9,000-9,500 km (which is revised down by the ministry from 9,500–10,000 km) in FY26, which translates to a pace of 25-26 km/day, which would be the lowest daily execution rate in the last five years,” it said.
The agency anticipates a pickup in awards to 9,000-9,500 km in FY26, supported by an expected improvement in the latter half of the year following a recent ministry directive which mandates that projects can only be awarded after securing 90% right-of-way, forest clearances, and necessary general agreement drawing approvals for bridges.
The revised estimate, down marginally from the earlier forecast of 9,500–10,000 km and is attributed to expectations of lower execution in the current year, driven by extended monsoon periods and a decline in project awarding over the past two years, FY2024 and FY2025.
On the revenue front, toll collections are projected to grow 5-8% in FY26, driven by a combination of 3-4% traffic growth and annual toll rate increases of 2.3-4%.
In a significant push for asset monetisation, the National Highways Authority could garner Rs 35,000-40,000 crore in FY26 through toll-operate-transfer (TOT) bundles and its infrastructure investment trusts (Invits). This would bring the national highways builder’s cumulative monetisation since inception to around Rs 1.3 trillion, achieving 81% of the monetisation pipeline target of Rs 1.6 trillion.
Describing the recent tightening of bidding norms for hybrid annuity model (HAM) and engineering, procurement, and construction (EPC) projects as a welcome step, the agency said competitive intensity is unlikely to ease materially in the near term. Given the declining order book for contractors, a meaningful and sustained pickup in order awarding activity from the ministry remains vital to ease competitive pressure and support sector profitability.