Although pick up of projects is on the rise, execution remains tepid : ICRA

NHAI set itself a target of 5,500 km for FY 15 but they will have to award around another 3900 km by March to meet their target

With the Centre doubling the ministry of road transport and highways’ upper limit for appraising and approving projects to Rs 1,000 crore, the sector is set to revive, says research and rating agency ICRA. However, it adds execution of projects remains tepid.

While the National Highways Authority of India had set a target of 5,500 km for FY15, it will have to award another 3,900 km by March to meet the target. “An uphill task,” notes the ICRA report.

“While the new government taking several initiatives such as delegating the powers for grant of forest clearances to the regional offices, online filing for clearances to construct rail over-bridges and under-bridges, and increasing limits on sand mining, the actual execution is yet to gather momentum. ICRA believes that starting June quarter, these measures could start yielding positive results, giving a fillip to the pace of execution,” said Rohit Inamdar, senior vice-president, ICRA.

ICRA analysed 113 build-operate-transfer road projects awarded in India. The analysis pointed to a steady deviation from the earlier debt/equity norm of 70:30 (2.33x) with 37 per cent of the projects having higher than 70:30 debt/equity ratio. Around 10 per cent of the projects, mostly annuity-based, have contracted debt to the extent of 90 per cent of the initial project cost. Additionally, the analysis reveals that 80 per cent of the projects witnessed delays in execution and in 60 per cent of cases, the delay was six months or higher and 40 per cent of the projects were delayed by one year.