Highway projects to open up Rs 42K-cr infra biz

NHAI to award 7,994-km highway projects in the current financial year; steel, cement and bitumen companies to benefit most.

Consumption of cement, steel, and bitumen is to get a boost of Rs 42,000 crore, as the National Highways Authority of India (NHAI) has announced to award 7,994 km of highway projects in the current financial year.

“In road building, 70 per cent is used in buying raw material, around 20 per cent goes in labour cost and the rest goes into machines,” said a World Bank official, who did not want to be identified.

The official added that this was also bound to increase the country’s import bill because cement and bitumen are imported from countries like Bangladesh and Iran.

In the current financial year, NHAI has announced to award 59 projects with a total project cost of around Rs 60,000 crore. Though the demand from projects awarded this year will be spread over the period of construction, which is normally three years, the current demand also comes from the ongoing projects.

India is the world’s second-largest producer of cement. It has also outpaced the growth rates of other prominent industries on the back of factors such as rising demand from the housing sector, increased activity in infrastructure, and construction recovery. The cement industry sustained its growth rate even during the economic slowdown. It is anticipated that the annual cement output in the coming years will grow at around 12 per cent during 2011-14 to reach 303 million tonnes (mt).

Cement consumption over the years has grown by more than nine per cent and is expected to take the growth rate in double digits.

With vast road development and maintenance happening across the country, bitumen consumption is also seeing huge growth.

This huge demand has led to a demand-supply mismatch, leading to increased import. “Not only does the import bill increase, the quality is also a question. Like a lot of developers are importing bitumen from Iran — the quality of which is questionable,” said the World Bank official.

Some believe that the economic impact of roads is the highest, as the roads not only boost consumption in terms of raw material but also provide connectivity to the far-flung areas. “Roads not only provide economic impetus in terms of consumption but also provide connectivity to far-flung areas, giving them access to the markets that helps in improving the economic condition of the area. The kind of impact roads have cannot be matched by any other mode,” said Amrit Pandurangi, senior director at consultancy firm Deloitte.

Others say good connectivity through roads develop a city. Pune’s development as an industrial township actually accelerated after it got the expressway connectivity from Mumbai.

That is the kind of impact roads have in economic development,” said Arvind Mahajan, executive director, KPMG, another consultancy company.