Published at February 15, 2025 by InfraJunction
The slow pace of awarding new highway projects over the past two years is expected to reduce the speed of highway construction in the next financial year (FY26), according to a report by ICRA.
In FY25, the government had already lowered its highway construction target by 15% to 10,412 km due to elections and a prolonged monsoon. Now, ICRA estimates that highway construction by the Ministry of Road Transport and Highways (MoRTH) will drop further by 5% in FY26. This means that the expected road construction will be around 9,500-10,000 km, compared to the estimated 10,000-10,500 km in FY25.
Between April and December 2024, only 3,100 km of new projects were awarded, the same as last year. This is much lower than the 5,835 km of projects awarded during April-December 2023. ICRA predicts that project awards will be in the range of 8,500-9,000 km in FY25, similar to FY24. However, there has been some improvement in project awarding since November 2024. If this trend continues, there could be a 9-11% growth in project awards during FY26.
Although the pace of highway construction is slowing down, the focus on expressways and high-speed corridors will lead to better lane-km expansion. However, since it takes around 6-9 months for a project to move from awarding to actual construction, road developers may see slow revenue growth over the next 12-15 months.
According to Vinay Kumar G, sector head of corporate ratings at ICRA, competition among developers will remain high. Since fewer projects are available, developers will bid aggressively to secure orders.
The National Highways Authority of India (NHAI) has raised Rs 8,353 crore this financial year through highway monetisation under the Toll Operate Transfer (ToT) model. Additionally, another ToT bundle will be monetised this year.
Apart from ToT, NHAI plans to raise Rs 21,000 crore through the Highway Infrastructure Trust. Another Rs 10,000 crore will come from the securitisation of parts of the Delhi-Mumbai Expressway. While the total monetisation is expected to be lower than the National Monetisation Pipeline (NMP) target of Rs 53,400 crore for FY25, it will still surpass the FY24 figure of Rs 31,600 crore.
ICRA expects toll collection to grow by 7-9% in the coming years. However, due to a slowdown in the construction, manufacturing, and mining (CMM) sectors, overall traffic growth is likely to slow down to 2-3.5% in FY25. As a result, toll revenue growth may also decline to 5-7%.
The toll rate growth has been low in FY25 but is expected to increase by about 3.5-4.2% in FY26. This could provide some relief to developers and authorities managing toll-based roads.
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