Highway Awards Slowed by Land Shortage and Delays in Approvals: Crisil Report

Crisil Warns of Sluggish Pace in Highway Awarding

The domestic rating agency Crisil has emphasized the need to revive the pace of highway awarding, citing a lack of encumbrance-free land and a prolonged approval process as the primary drivers of the sluggish pace of road awarding. According to a report by Crisil, the capital availability in the sector is healthy, with both budgetary allocations and opportunities for monetization.

The report highlights that the awarding of road projects has been impacted by the non-availability of encumbrance-free land and the elongated approval process. This has resulted in a decline in the awarding of road projects, from over 12,000 kilometers in FY23 to below 8,000 kilometers in FY25. Despite an uptick in execution in FY24, the pace has since reduced gradually.

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The report estimates that the awarding of road projects will remain below 8,000 kilometers in FY26, while execution is expected to be higher. However, a gradual revival in project awarding is expected in the road sector, driven by healthy budgetary allocation and efforts to debottleneck the approval processes.

The National Highways Authority of India is expected to monetize assets worth Rs 70,000-80,000 crore to fund growth, with asset monetization gaining further momentum. The budgetary allocation for the Ministry of Road Transport & Highways (MoRTH) Government of India remains healthy, with a 12% compound annual growth rate (CAGR) between FY21 and FY26.

The report also notes that the execution of smart meters in electricity distribution may face delays due to right-of-way issues and lower-than-anticipated consumer acceptance. However, data centers and smart meters are considered more bankable due to their relatively more mature business models and higher track records.

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Overall, the investment growth in the key infrastructure segment is expected to be 45-50% over the next two financial years, reaching Rs 23-24 lakh crore, driven by strong government policy support and domestic demand. The growth is expected despite the West Asia conflict and global uncertainties.