India's ambitious highway development program is facing significant headwinds, with a substantial number of projects worth ₹4 lakh crore experiencing delays. Simultaneously, approximately 200 highway projects that have been bid out are awaiting commencement.
Reasons for the Delays
Several factors contribute to the delays in highway projects. Land acquisition issues, forest and wildlife clearances, and railway approvals are major bottlenecks. Union Minister Nitin Gadkari has acknowledged these challenges and stated that the government is working closely with state authorities and stakeholders to resolve the pending issues.
Cost overruns are another consequence of these delays. Increased land compensation costs, rising material prices, the impact of the Goods and Services Tax (GST), public demands for additional structures like underpasses and overpasses, and design changes required to meet railway norms for bridges all contribute to escalating project costs.
CareEdge Ratings reported that as of December 2024, 55% of national highway projects awarded under the Hybrid Annuity Model (HAM), with an aggregate construction cost of ₹1 trillion, were delayed by more than six months. This is a significant increase from June 2023, when the proportion of delayed projects was 33%. Other factors contributing to delays include a standard two-year construction period regardless of project complexities, heightened competitive intensity, the non-availability of hindrance-free right of way, and excessive rainfall.
Government Measures
The government is taking several steps to address these challenges. Minister Gadkari stated that for projects facing prolonged delays with no progress, the Ministry terminates the contracts and re-awards them, sometimes with revised configurations, to ensure completion.
The National Highways Authority of India (NHAI) is also planning to bid out 124 highway and expressway projects worth ₹3.4 lakh crore in the fiscal year 2025-26. These projects will cover a total length of 6,376 kilometers. To facilitate these projects, NHAI is putting the entire list of projects in the public domain. Nearly 78% of these projects will be offered under the Public Private Partnership (PPP) mode.
Impact of Delays
Delays in highway projects have several adverse impacts. They lead to cost overruns, which strain government finances. They also disrupt infrastructure development and can hinder economic growth. Moreover, delays can cause inconvenience to the public due to prolonged construction periods and traffic disruptions.
CareEdge Ratings has forecast a 7-10% decline in the pace of national highway construction in FY25 compared to FY24. This slowdown is attributed to execution challenges, intensified competition, and delays in receiving appointed dates after project awards. Maulesh Desai, Director of CareEdge Ratings, noted that among the under-construction projects, 55% are delayed by more than six months due to execution challenges and a competitive landscape.
The Way Forward
To mitigate delays and ensure the timely completion of highway projects, several measures are necessary. These include expediting land acquisition and environmental clearance processes, improving coordination between different government agencies, and resolving contractual disputes quickly. It is also important to address the factors contributing to cost overruns, such as rising material prices and design changes. By addressing these challenges, India can accelerate its highway development program and reap the economic benefits of improved infrastructure.
