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Highways Construction in India to Slow Down in 2019-20 – CARE rating

Infra News - Published on Thu, 19 Sep 2019

CARE Ratings expects the overall pace of construction to slow down to about 26-27 km per day during FY 2019-20 owing to slow down in pace of awards, limited budgetary support, high risk aversion of public sector banks to infrastructure projects, worsened liquidity position of NBFCs and disruption in construction activity during monsoon and high cost of land acquisition. Furthermore, any short fall in external borrowings or any short fall in fund raising under toll operate transfer model will have negative impact on construction rate. In view of slowdown in pace of awards under Hybrid Annuity model and Engineering Procurement Construction model, CARE Ratings opines that to keep the pace of construction at current rate of 30 km per day entails private investment under Build operate transfer model. However, road developers and lenders are wary of BOT road projects due to traffic and construction risks in BOT model. Government needs to mitigate or eliminate traffic risks and construction risks to attract private investment in BOT road projects viz. by way of extending concession period in case of shortfall in traffic estimates.

National Highways construction rate improved to around 30 km per day in FY2018-19 compared to 26.93 km in FY2017-18 and further improved to around 31 km per day in Q1FY2019-20 owing to huge projects awarded during previous years, sturdy pace of land acquisition during FY2018-19 and slew of reforms taken by government.

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Posted By : Ratan Singh on Thu, 19 Sep 2019
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