Road traffic to grow marginally: CRISIL

Development of roads to be affected badly

Road traffic in India is expected to grow only marginally, between two and five per cent, during the next financial year, in the wake of a slowdown in the economy, according to CRISIL Research.

Conducted over 15 national highway stretches, the research has showed a decline in passenger car units to three to four per cent in 2012 and two to three per cent in 2013, compared with seven to eight per cent in between 2007 and 2011.

“This is primarily because commercial vehicular traffic, which accounts for over three-fourths of the total traffic, hard-braked, growing at just two to three per cent in fiscal 2012 and by one per cent in 2013. On the other hand, passenger vehicle traffic grew a healthy 15 per cent in the two years. Our estimate is that overall traffic growth has remained weak in the current financial year (2014) and will continue to languish around three to five per cent over the next 12 months. Typically, a 100 bps drop in traffic growth over the concession period can result in a 75-100 bps decline in project returns,” said Prasad Koparkar, senior director at CRISIL Research.

Road developers in the country have been struggling since the past few years due to a slowdown in traffic which had affected their toll revenues, forcing road developers to stay away from bidding for road projects in the country. The government was also forced to cancel the awarding of road projects on the Public-Private Partnership mode.

The study has also said that of a total of 78 BOT projects completed between fiscals 2000 and 2013, more than three-fourths - or 61 projects -- faced delays, with the average time overrun at 10.5 months. The situation has only worsened in the last couple of years with close to 33 projects awarded in fiscal 2012 (aggregating 4,650 km and roughly two-thirds of the total length awarded that year) yet to start construction.

The government had recently allowed two policy decisions aimed at improving the overall road infrastructure in the country. While the exit policy announced in January this year allows companies to exit road projects and sell their stake, another policy allowing a rescheduling of premium that road developers owe the government was approved last month. The policy allows the government to extend a loan to developers to repay the premium that they owe the government.