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Road Infrastructure in India

July, 2014


India possesses the second largest road network in the world. The 4.7 million km network transports over 60 per cent of all goods in India and 85 per cent of the country's total passenger traffic. Road activity has progressively increased over the years as connectivity between cities, towns and villages in the country has improved.

This growth in automobiles and freight movement requires a road network good enough to carry the traffic. The Government of India, perhaps seeing this need, has set aside 20 per cent of the total investment of US$ 1 trillion for infrastructure during the 12th Five-Year Plan (2012-17), to develop the country's roads.

Market size

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

As on March 31, 2012, India had 2,409 public-private partnership (PPP) projects across the infrastructure sector, of which 874 werefor roads and highways. Road construction projects awarded to build-operate-transfer (BOT) companies recorded a CAGR of 17.1 per cent over FY 06-13.

The financial outlay for road transport and highways grew at a CAGR of 19.4 per cent in the period FY 09-14. For FY 14, the Planning Commission of India provided an outlay of US$ 6.9 billion for the road segment.

Key Investments

Some of the key investments and developments in the Indian roads sector are as follows:

IRB Infrastructure Developers Ltd has received the Letter of Award from National Highways Authority of India (NHAI) for four laning of Yedeshi-Aurangabad section of NH-211 which totals about 190 km. The estimated cost of this toll project is Rs 3,200 crore(US$ 532.64 million) and the project will be undertaken on design, finance, build, operate and transfer (DFBOT) basis. The company has also bagged a Rs 2,300 crore (US$ 382.76 million) project for four-laning of Kaithal-Rajasthan border section of NH-152/65 in Haryana. The construction period for the project is 910 days.

The Canada Pension Plan Investment Board (CPPIB) plans to invest about US$ 332 million in infrastructure projects in India through an investment with Larsen & Toubro (L&T). The Toronto-based pension fund manager will initially invest about US$ 166 million in L&T's unit, L&T Infrastructure Development Projects Ltd; it will invest an additional US$ 166 million within 12 months of the initial investment.

Hindustan Construction Company Ltd (HCC) has bagged contracts worth Rs 726 crore (US$ 120.82 million). One contract is a Rs 433 crore (US$ 72.09 million) order from Bihar Rajya Pul Nirman Nigam to construct a 2.9 km four-lane bridge between Nasriganj and Daudnagar over the river Sone in Bihar. HCC also received orders totalling Rs 293 crore (US$ 48.78 million) from its businesses in the water, nuclear and industrial segments.

NHAI has started a portal where information related to all highway projects under PPP mode will be made available."NHAI proposes to place all information relating to projects taken up by them under private public partnership mode in the public domain to be available on a link - www.nhai.org.in," as per an official statement.

Government Initiatives

The Indian government plans to set up a finance corporation with an amount of Rs 1 trillion (US$ 16.65 billion), in collaboration with Japanese investors, to fund projects in the road segment. The Japanese partners are expected to have a 26 per cent stake with assured returns of nine per cent, as per a source of the roads ministry.

The Government of India has approved road projects worth about Rs 40,000 crore, which include around Rs 20,000 crore (US$ 3.33 billion) highway projects in Jammu & Kashmir (J&K), Rs 15,000 crore (US$ 2.49 billion) road-building projects in the Northeast, a Rs 6,000 crore (US$ 999.04 million) road network in Uttarakhand and the realignment of roads in Himachal Pradesh.

The Ministry of Road transport and Highways and the Department of AIDS control, Ministry of Health and Family Welfare have signed a Memorandum of Understanding (MoU) with the objective to provide HIV preventive services to transport sector workers, by spreading awareness about HIV/AIDS, encouraging behavioural change, conducting health education, training and service delivery, etc.

Road Ahead

India's rising population demands proper infrastructure. The Centre has helped in this regard through policies that have attracted involvement from the private sector, which is now a key player in the progress of road infrastructure in India.

The Indian Government plans to develop a total of 66,117 km of roads under different programmes such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE). It has set a target of building 30 km of road a day from 2016.

Further, about two-thirds of NHDP road projects (ex-phase IV) have not been awarded as yet, thus offering a massive opportunity to private players in the coming years.

Exchange Rate Used: INR 1 = US$ 0.0166 as on July25, 2014

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