India's road construction likely to slide to 5-year low in FY26: Icra

Road construction in the country is estimated to drop to a five-year low of 25-26 km per day in FY2025-26, domestic rating agency Icra said on Tuesday.

Icra attributed the decline to lower execution due to extended monsoon periods and a decline in project awarding over the past two years.

The rating agency said India will achieve an execution of over 9,000 km of roads in FY26 or 25-26 km per day, which represents a "significant slowdown".

This represents a downward revision from an earlier forecast of 9,500-10,000 km of execution in FY26, Icra said in a statement.

The slowdown in FY26 will be on top of a 14 per cent decline in the previous fiscal, the rating agency said, pointing out that 10,660 km of road building was achieved in FY25 and 12,349 km in FY24.

Project awarding by the Ministry of Road Transport and Highways in FY25 is estimated to be flat year-on-year at 8,000-8,500 km, which is significantly lower than the awards seen between FY21 and FY23, it said.

In FY26, the project awards will go up to 9,000-9,500 km of roads supported by an expected improvement in the latter half of the year following a recent ministry directive.

The directive mandates that projects can only be awarded after securing 90 per cent right-of-way, forest clearances, and necessary General Agreement Drawing (GAD) approvals for bridges, it added.

The agency said the recent tightening of bidding norms for Hybrid Annuity Model (HAM) and Engineering, Procurement, and Construction (EPC) projects is a welcome step and added that competitive intensity is unlikely to ease materially in the near term.

Given the declining order book for contractors, a meaningful and sustained pickup in order awarding activity from the Ministry remains vital to ease competitive pressure and support sector profitability, it added.

From a revenue perspective, the agency estimated toll collections may grow by 5-8 per cent in FY26 on the back of a 3-4 per cent traffic growth and annual toll rate increases of 2.3-4 per cent.

The National Highways Authority of India (NHAI) could potentially garner Rs 35,000-40,000 crore in FY26 from Toll-Operate-Transfer (TOT) bundles and its Infrastructure Investment Trust (InvIT), it said, adding that this would bring the NHAI's cumulative monetisation since inception to around Rs 1.3 lakh crore or 81 per cent of the National Monetisation Pipeline target of Rs 1.6 lakh crore.