Road sector on revival path as reforms kick in: Report

Policy measures taken in the roads sector over the past few years are likely to revive the overall sentiment in the sector that has been struggling for years due to land acquisition issues and delay in awarding new contracts, says an industry report.
"A host of policy measures over the past few years can resurrect waning investor confidence in the struggling roads sector as well as put it back on the growth path. However, its benefits are likely to accrue only in the long-term," India Ratings Senior Director Srinivasan Nandakumar told reporters.
The government has taken some measures over the past few years like re-schedulement of premia payment, shifting towards cash contracts, de-linking of forest from environment clearances and relaxation of exit clause for developers, etc.

Though the last Budget had spoken about setting up of a roads regulator, nothing has moved on that front so far.
"These steps are positive. The effect of premium reschedulement could only be marginal and delinking of forests and environmental clearances is likely to mitigate completion risks by a reasonable extent," Nandkumar said.
Also, policy measures relating to partial tolling during construction (on certain projects) would not only ease liquidity pressure on projects, but also assist in gauging actual traffic numbers, he said.

However, Nandkumar maintained that there was a need for the co-ordination among the concerned agencies to ensure speedy execution of the projects.

"The government has been sporadically attempting to fix issues separately instead of a one-time redressal of all issues co-ordinately. Also,delays in translating announcements into concrete, on-the-ground actions actions are diluting their efficacy.
"Moreover, there is no unanimity of thought among various agencies in resolving issues, leading to contradictory positions and sub-optimal solutions," he said.
On the current political scenario with general elections round the corner, the agency's associate director for infra and project finance Chintan Lakhani said, "Though these decisions are likely to bring the sector back on the growth trajectory, it will now be important to see how things take shape only after the new government takes charge."

He said currently the developers are either not investing in or exiting highways projects citing government's inability to provide the required clearances in time and thereby making them unviable.
"But now the challenging part will be the implementation of the policies. At least for the next four-five months till we get the new government, we do not expect any significant development. However, we expect the sector to gain renewed attention from the new policy makers," Lakhani added.