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Road Infrastructure in India

October, 2014


India has the second largest road network in the world at 4.7 million km. This network transports more than 60 per cent of all goods in the country and 85 per cent of India’s total passenger traffic. Road activity has gradually increased over the years with the improvement in connectivity between cities, towns and villages in the country.

With automobiles and freight movement also growing at a rapid rate, the necessity for a road network good enough to carry the traffic is paramount. Understanding this need, the Government of India has set aside 20 per cent of the investment of US$ 1 trillion reserved 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 projected to grow at a compound annual growth rate (CAGR) of 17.4 per cent over FY12–17. The country's roads and bridges infrastructure, which was valued at US$ 6.9 billion in 2009 is expected to touch US$ 19.2 billion by 2017.

The financial outlay for road transport and highways grew at a CAGR of 19.4 per cent in the period FY09-14. For FY14, India’s Planning Commission provided an outlay of US$ 6.9 billion for the roads segment.

Road construction projects awarded to build-operate-transfer (BOT) companies achieved a CAGR of 17.1 per cent over FY06-13.

Key Investments

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

The Union Minister for Rural Development, Sanitation, Drinking Water & Panchayat Raj, Mr Nitin Gadkari has approved 28 rural road projects worth Rs 438 crore (US$ 71.58 million) for constructing roads in Leh and Kargil districts in the Ladakh region of Jammu and Kashmir (J&K), under the Pradhan Mantri Gram Sadak Yojna (PMGSY).

IRB Infrastructure Developers Ltd has bagged the contract to operate and maintain the Mumbai–Pune Expressway and the old Mumbai–Pune highway till 2023. The concession period for this project is over eight years and IRB will be allowed to collect toll for four years staring 2019. IRB's previous contract to operate the two roads ends in 2019.

The environment ministry has given the go-ahead to three projects and finalised terms of reference for two more to be constructed on the Delhi–Mumbai Industrial Corridor (DMIC).The projects, which received clearance on July 30, 2014, were the Dholera investment region in Gujarat, Manesar–Bawal investment region in Haryana, and Khuskhera–Bhiwadi–Neemrana investment region in Rajasthan.

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

Hindustan Construction Company Ltd (HCC) has won a contract valued at Rs 433 crore (US$ 70.76 million) 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. The company also received orders worth Rs 293 crore (US$ 47.88 million) from its businesses in the water, nuclear and industrial segments.

NHAI has started a portal where information regarding all highway projects under public–private partnership (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," according to an official statement.

Government Initiatives

India’s Prime Minister, Mr Narendra Modi has outlined a broad vision for new modes of infrastructure development in India, which includes nationwide connectivity networks of roads, gas grids, water grids and power transmission lines. Mr Modi dedicated to the nation four laning of Pune–Solapur National Highway No. 9 section and the 765 kV Raichur–Solapur transmission lines.

India and Japan have taken steps to improve investment between the two nations. As part of India–Japan Strategic and Global Partnership, the two sides launched a Special Economic Partnership Initiative (SEPI), including the Delhi–Mumbai Industrial Corridor (DMIC) project.

The Indian government plans to set up a finance corporation with an amount of Rs 1 trillion (US$ 16.34 billion), in collaboration with Japanese investors, to fund projects in the roads segment. The Japanese partners are expected to have a 26 per cent stake with assured returns of nine per cent, according to an official source.

The Indian government has approved road projects worth about Rs 40,000 crore (US$ 6.53 billion), including around Rs 20,000 crore (US$ 3.26 billion) highway projects in J&K, Rs 15,000 crore (US$ 2.45 billion) road-building projects in the Northeast, Rs 6,000 crore (US$ 980.55 million) road network in Uttarakhand, and 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 signed a Memorandum of Understanding (MoU) with the objective of providing HIV preventive services to transport sector workers, by spreading awareness about the condition, encouraging behavioural change, conducting health education, training and service delivery, etc.

Road Ahead

India's growing population requires proper infrastructure. The government seeing this need has provided a lot of assistance through policies that have attracted involvement from the private sector, which is now a key player in the growth of road infrastructure in the country.

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), and has set an objective of building 30 km of road a day from 2016.

Also, 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 future.

Exchange Rate Used: INR 1 = US$ 0.0163 as on October 28, 2014

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