Grand announcements

Executing road projects worth Rs 15 trillion in two years will be a tall order

Road Transport and Highways Minister Nitin Gadkari told industry representatives during a video-conference last week that his ministry had firmed up plans to execute Rs 15 trillion worth of highway projects in the next two years. Making an announcement of such a huge investment in the road construction sector was expectedly greeted as a welcome government move to revive the economy after the devastation caused by Covid-19 and the lockdown. 

Road construction creates jobs and helps revive demand. It also strengthens infrastructure, improves road connectivity between cities and enhances productivity as well as ease of doing business. But how big was this investment plan? And how feasible was this?

According to reports, the planned investment of Rs 15 trillion for road construction was part of the National Infrastructure Pipeline (NIP) which listed a series of projects in different infrastructure sectors to be implemented by March 2025. The total size of the NIP was originally estimated at Rs 102 trillion at the end of December 2019 and increased to Rs 111 trillion by the end of April 2020. The share of the road sector in NIP was about Rs 20 trillion or about 18 per cent of the total NIP value.

Thus, what Gadkari had proposed was a fast-tracking of road construction on a massive scale — almost three-fourths of the projects meant to be executed in the coming five years were to be rolled out in just two years. That would be a tall order, even though the pace of road construction in the last few years had picked up considerably and was commendable at 30 kilometres of road being built in a day on average.

In spite of that, the investment rate in the last few years was nowhere near what is being proposed now. The total investment in the road sector by the Centre and the states was estimated at Rs 1.9 trillion in 2018-19. A projected investment of Rs 15 trillion in two years would mean an average annual investment of Rs 7.5 trillion. The gap is huge.

Look at it in another way. The government’s NIP had broken down its annual investments for the next few years. It had, thus, projected an investment of Rs 7.4 trillion in the current and next year — Rs 3.83 trillion in 2020-21 and Rs 3.57 trillion in 2021-22. In other words, even Gadkari’s plan for Rs 15 trillion in the next two years was a little more than double of what the NIP had outlined.

Note that of the Rs 7.4 trillion investment projected in the NIP in the coming two years, as much as Rs 5.12 trillion was to come from the Centre and the remaining from the states. Given that neither the Centre nor the states crossed even the Rs 2 trillion-mark in their investments in the road sector in the last few years, it is doubtful if the target of Rs 15 trillion in the next two years can be achieved.

Now, if you consider what the Union Budget for 2020-21 had provided by way of expenditure on the road sector, the enormity of the challenge will become more obvious. For the central sector schemes and projects under the ministry of road transport and highways, the Union Budget for 2020-21 had allocated a total outlay of Rs 91,600 crore, an 11 per cent increase over the previous year. And the total capital outlay for the National Highways Authority of India (NHAI), the principal central government agency responsible for overseeing highway construction projects, saw a 4 per cent cut to Rs 1.07 trillion in the current year.

These outlays are hardly adequate to give Gadkari the confidence to achieve a dramatic surge in investments in the road construction sector. In the past, Gadkari was credited with the view that inadequate allocation of government funds for the road sector did not stop him from planning big as he could raise resources from the market to finance road construction projects. The big question is whether Gadkari retains that confidence now to raise more resources to almost treble investments in the road constructions sector in a post-Covid world.