Highway project awards decelerate to 6-yr low amid land acquisition delays

NHAI order book muted for next fiscal year due to land acquisition delay

The pace of project award for highways is the slowest in six years due to delays in land acquisition. This will slacken the pace of construction in the next two years. 

Both the Ministry of Road Transport and Highways and the National Highways Authority of India (NHAI) are struggling to award more highway projects. The NHAI has awarded projects across 3,700-4,000 km during the current fiscal year so far. 

“Road project award is the lowest in the last six years and is expected to remain muted in FY21,” said Rajeshwar Burla, vice-president, associate head-corporate ratings, ICRA.

The order book for the next fiscal year remains muted for the NHAI. However, the highway project execution is currently on track. “This is because the pace of award in the past four years was significantly higher, which created a strong pipeline of projects that are being executed,” he said.

While the decline in project award is evident, it will start reflecting in execution by 2022, as the project award started slowing in 2019. Some experts, however, feel land acquisition is not a problem anymore as the compensation is very attractive.

Former road transport secretary Vijay Chhibber said part of the delay in award of projects was because of the appraisal process. “It is mainly funds that hamper the execution, as the finance ministry has started appraising the road projects, which causes delay,” he said.

A project goes to the finance ministry for appraisal through the Standing Finance Committee channel, which gets delayed by six to nine months, he said. Sometimes, most of the projects find it difficult to get the approval as the ministry does not give approval until 90 per cent of the land is in possession.

Practically, the work can begin even with 80 per cent land in possession. The remaining 10 per cent can be done after the commencement of the work as the entire acquisition process takes three to four months, Chhibber said.

Union Road Transport and Highways Minister Nitin Gadkari had last year told Parliament that the national highway projects were delayed reasons ranging from utility shifting, non-availability of soil and aggregate, environment and wildlife clearances, road over bridge and road under bridge issues with the railways. 

Public agitation for additional facilities, arbitration and contractual disputes with contractors, hurdles in land acquisition, and poor performance of contractors also impacted construction, he said.

According to the minister, the government has taken measures to expedite land acquisition for road projects. The higher value amongst prevailing circle rates or average of highest 50 per cent of sales-transactions of the past three years is the market value of land. Value of land in rural areas is multiplied by a factor determined by the ‘appropriate’ government and an interest rate of 12 per cent per annum is paid on market value of land from date of 3A/3D notification till the date of taking possession or payment of compensation, whichever is earlier.

The Centre has constituted high-powered committees under state chief secretaries to resolve the land acquisition issue. Regional officers have been assigned to take decision faster, while retired personnel of revenue department are engaged at regional officer and project director level as well as in the Competent Authority for Land Acquisition level to assist in the work.