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Road Infrastructure in India

May, 2014

Introduction

India has the world’s second largest road network, spanning a total of 4.7 million km. This network transports over 60 per cent of all goods in the country and 85 per cent of total passenger traffic. With greater connectivity between cities, towns and villages in India, road traffic has increased over the years. This growth in automobiles and freight movement necessitates a better road network in the country.

Perhaps seeing this need, the Government of India has reserved US$ 1 trillion for infrastructure for the 12th Five-Year Plan (2012–17). The Five-Year Plans have so far been highly beneficial for the sector in the country – the length of the national highways which was 21,378 km during the late 1940s touched 71,772 km by the end of the 11th Five-Year Plan (2007–2012). Furthermore, the Planning Commission of India aims to spend nearly 20 per cent of the total investment of US$ 1 trillion during the 12th Five-Year Plan to develop roads.

Market Size

The value of total roads and bridges infrastructure in the country is projected to grow at a compound annual growth rate (CAGR) of 17.4 per cent over FY 12–17. India’s roads and bridges infrastructure was valued at US$ 6.9 billion in 2009 and is expected to reach US$ 19.2 billion by 2017.

The outlay for road transport and highways increased at a CAGR of 19.4 per cent in the period FY 09–FY 14. For FY 14, the Planning Commission provided an outlay of US$ 6.9 billion for the road sector.

Recent Developments

L&T Construction secured orders worth Rs 1,009 crore (US$ 167.44 million) across different segments in March 2014. Its buildings and factories segment received orders worth Rs 573 crore (US$ 95.09 million) for construction of a mixed-use development project in Lucknow as well as a community centre in Bengaluru. L&T’s transportation infrastructure segment received an order worth Rs 316 crore (US$ 52.44 million) for design, engineering and construction of an elevated road on the Budge Budge Trunk Road in Kolkata. The company also bagged an order worth Rs 120 crore (US$ 19.91 million) from the Odisha Power Transmission Corporation for 33 sub-stations of 11 kilovolts (kV) each and associated lines for the Odisha distribution system strengthening project.

Mumbai-based Hindustan Construction Company (HCC) has secured contracts worth Rs 726 crore (US$ 120.47 million). One of the contracts is a Rs 433 crore (US$ 71.84 million) order from Bihar Rajya Pul Nirman Nigam to build a 2.9 km four-lane bridge between Nasriganj and Daudnagar over the river Sone in Bihar. The construction company also received orders totalling Rs 293 crore (US$ 48.61 million) from its businesses in the nuclear, water and industrial segments.

The Union Minister for Road Transport and Highways, Mr Oscar Fernandes gave smart cards under the Rashtriya Swasthya Bima Yojna (RSBY) to auto drivers and taxi drivers in Faridabad in February 2014. The minister said that the scheme will look after the health concerns of auto rickshaw and taxi drivers, who constitute an important segment of the unorganised workers in urban regions.

Also, while addressing a conference of stakeholders in Road Safety in January, 2014, Mr Fernandes asked all stakeholders to focus on efforts to bring down road fatalities by 50 per cent over the next five years. He expressed concerns over the 138,000 lives lost in around 490,000 road accidents reported during 2012. The minister assured that efforts were being undertaken to improve safety on roads in India, and called upon citizens to collectively address the concerns.

The Asian Development Bank (ADB) and the Government of India signed loan agreements valued at US$ 605 million in February, 2014, for three separate projects to improve rail services, power and roads in India.

Policy Initiatives

A government panel has suggested five road transport and highway projects worth Rs 7,595 crore (US$ 1.26 billion) in the public–private partnership (PPP) mode. The Public–Private Partnership Appraisal Committee (PPPAC), headed by Mr Arvind Mayaram, Economic Affairs Secretary, recommended the projects in a meeting in January, 2014. The projects, which involve two and four laning of roads and highways, are in Madhya Pradesh, Haryana, Karnataka and Kerala; the fifth project is Eastern Peripheral Expressway. The length of the projects total 626 km.

The Union Cabinet in February 2014 gave its approval for declaration of about 7,200 km of State Roads as new national highways. It is anticipated that funds will be available for improvement of the new national highways. Adequate funds are also expected for undertaking the work of improving the other existing national highways network totalling 21,271 km, which are not covered under any programmes/schemes till now.

The Cabinet Committee on Economic Affairs (CCEA) has approved six laning of Eastern Peripheral Expressway of National Highway Number NE-II in Haryana and Uttar Pradesh (UP) in the Build, Operate and Transfer (BOT-Annuity) in Design, Build, Finance, Operate and Transfer (DBFOT) pattern. The total cost is projected to be Rs 6,284.20 crore (US$ 1.04 billion). The length of the road will be around 135 km.

Under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Ministry of Urban Development has sanctioned buses to 13 different cities across India. These cities will see project work relating to ancillary infrastructure such as Depot and ITS for urban transport. The total cost of the projects is expected to be around Rs 464 crore (US$ 74.94 million). The objective behind sanctioning these buses is to improve the transport system in the cities, and attract people into using the public mode of transport.

Road Ahead

India’s population rise necessitates a steady growth in infrastructure. The government’s efforts regarding policies have ensured that the private sector is emerging as a key player in the development of road infrastructure in India.

The Centre is looking to develop a total of 66,117 kilometres of roads under several programmes such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE). A good portion of that work – 20,945 km – has already been completed, while the rest of the projects are expected to be complete by the end of the 12th Five-Year Plan.

About two-thirds of NHDP road projects (ex-phase IV) are still to be awarded, thus offering a big opportunity for private players over the next few years. For the 12th Five-Year Plan, the government targets to develop national highways at the rate of 20 km per day.

Exchange Rate Used: INR 1 = US$ 0.01659 as on April 16, 2014

References: Media Reports, Press Releases, Ministry of Road Transport and Highways Document, NHAI website.