The implementation of the National Highways Development Programme (NHDP) has finally started showing signs of recovery after a slowdown of almost three years. The initiatives taken by the central government have begun to show quantifiable results. The numbers registered in the past two fiscal years 2015-16 and 2016-17 reflect a heightened level of activity. The project award and completion targets for 2015-16 were almost met, lagging behind by about 15 per cent and 10 per cent respectively, depicting a satisfactory performance. However, 2016-17 lagged behind in terms of meeting the target numbers.
Project awards under HAM pick up pace
The NHDP saga has witnessed several troughs and crests. During 2015-16, the National Highways Authority of India (NHAI) achieved about 85 per cent of its project award target as against a realisation of 50 per cent in 2014-15, reporting impressive numbers. Overall, 78 contracts spanning about 4,300 km were awarded during the year. The key big-ticket projects awarded included the Eastern Peripheral Expressway and the Delhi-Meerut Expressway (two packages). Meanwhile, the year 2016-17 witnessed the award of 77 projects spanning 4,364 km that were valued at over Rs 600 billion. However, with this, NHAI achieved a mere 29 per cent of the targeted project award of 15,000 km for the year, reflective of a huge lag.
With respect to the mode of implementation, the engineering, procurement and construction (EPC) model was the dominant mode in 2015-16 with 81 per cent of the projects being awarded by NHAI under this mode. Next in line, the hybrid annuity model (HAM) found takers with the award of nine projects, accounting for 12 per cent of the total project award. Lastly, six projects (8 per cent of the total) were awarded on a build-operate-transfer (BOT) basis. Notably in 2016-17, the HAM mode of project implementation scooped up a large share in the total projects awarded with a significant 44 per cent of the projects (34 projects) being awarded under this mode. At the same time, the EPC and BOT modes saw a decline to 51 per cent and 5 per cent respectively. Key projects awarded under HAM included six-laning of the Handia-Varanasi stretch in Uttar Pradesh, two-laning with the formation of four-lanes of the proposed Shimla Bypass, and four/six-laning of the Kharar-Ludhiana section of National Highway (NH)-95.
Further, in terms of location of projects, in 2015-16, the maximum number of projects (16) were awarded in Uttar Pradesh (excluding projects with other states) followed by Maharashtra and Bihar. In terms of investment too, these states were ahead of the others, cumulatively accounting for a total of Rs 20.91 billion. Meanwhile, in 2016-17, Gujarat overtook Maharashtra as the state with the highest number of awarded projects during 2016-17 (12 projects accounting for 15 per cent of the total). This included six-laning of a section of NH-8 (Package 6), four-laning of the Bhavnagar-Talaja section, and four-laning of the Talaja-Mahuva section in Gujarat.
The year 2015-16 saw the maximum projects being awarded under Phase IV of the NHDP – 30 projects – worth Rs over 300 billion spanning a length of around 2,400 km. This was followed by Phase III under which 19 projects worth Rs 144 billion were awarded spanning over 1,000 km. In 2016-17 too, Phase IV accounted for the highest number of project awards – 38 projects worth Rs 317 billion spanning 2,554 km. On the whole, the long-stuck Phase VI has reported substantial activity in the past two years with the award of eight projects in 2015-16 and one project in 2016-17.
Project completion – Targets missed by a wide margin in 2016-17
In terms of project completion, NHAI completed 90 per cent of the construction target during 2015-16. The total length of roads completed during the year amounted to 1,798 km as against the target of 2,000 km. The authority’s construction rate stood at almost 5 km per day.
Meanwhile, in 2016-17, NHAI completed 31 projects spanning 1,911 km and achieved only 24 per cent of the completion target of 8,000 km. The maximum number of these completed projects was in Rajasthan (12 projects accounting for 39 per cent of the total). Of the total completed projects, 16 were constructed in the EPC mode, 13 in the BOT mode and remaining 2 were annuity projects. Further, the HAM projects awarded in 2015-16 and 2016-17 are likely to be completed in the next few years since a majority of these have achieved financial closure.
Reality check needed
While the overall performance has marked substantial improvement from the past, what the government needs to do is to set realistic targets. Further, issues of land acquisition and clearance hurdles, suboptimal performance of contractors and long-term funding woes, that are hampering the sector’s development, need to be dealt with. Besides, it is important to note that given the fact that the central government is already stretching itself to build roads at the fastest pace possible, the targets are being regarded as an ambitious goal. The government has been successful in infusing momentum in award activity, setting the ball rolling for sector growth. Hence, going forward, sound implementation of the projects awarded in the previous two fiscal years will be a major game changer.