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Highway to growth

India with a total road network of 5.5 mn, comprises of national & state highways and urban & rural roads. National Highways accounts for 2% of the total road network and carries over 40% of total traffic.

The construction of highways have reached 9,829 km during FY 2017-18, with an all-time high average pace of 27 km per day. This represents 20% growth over the last year, when 8,231 km were constructed. 17,055 km road length was awarded in the year, against 15,948 km last year. Expenditure of USD 18 bn was incurred on construction of national highways during the year 2017-18.

India has a well-developed framework for Public-Private-Partnerships (PPP) in the highway sector. Asian Development Bank ranked India #1 in PPP operational maturity and designated India as a developed market for PPPs.

The Govt. of India (GoI) is planning to expand the national highway network to over 200,000 km. It has recently launched the Bharatmala Pariyojana, which aims to build 66,100 km of economic corridors, border & coastal roads, and expressways to boost the highway network. It is envisaged that the programme will provide 4-lane connectivity to 550 districts, increase the vehicular speed by 20-25% and reduce the supply chain costs by 5-6%.

  • By 2022, the first phase of the programme will bring in USD 82 bn investments for a development of 34,800 km of highways.

100% FDI allowed under automatic route.

For more details refer to: FDI Policy 2017

HIGHLIGHTS

  • USD 82 bn to be invested for 34,800 km of highways by 2022 under Bharatmala
  • Highest ever construction of 133 km per day of rural roads in 2016-17
  • National Highways construction in India is targeted at 40 km a day in 2018-19

Industry Scenario

The GoI has given a massive push to infrastructure by allocating about USD 100 bn for infrastructure in the Union Budget 2018-19. It also plans to invest USD 22.4 bn towards road infrastructure in North-East region during 2018-2020.

The market for roads and highways is projected to exhibit a CAGR of 36.16% during 2016-2025, on account of growing government initiatives to improve transportation infrastructure in the country. Almost half of the 1,531 PPP projects awarded in India until March 2018 were related to roads (742).

The highways sector in India has been at the forefront of performance and innovation. The GoI has successfully rolled out more than 60 projects worth more than USD 10 bn based on the Hybrid Annuity Model (HAM). HAM has balanced risk appropriately between private and public partners & boosted PPP activity in the sector.

Asset recycling, through the toll-operate-transfer (ToT) model has been taken up by the National Highways Authority of India (NHAI) for 100 highways. The first bundle of 9 highways with an aggregate length of about 680 km was monetised successfully for an investment of USD 1.45 bn.

Growth Drivers

GD - Roads
  • Avg. highway length constructed/ day in FY18

    27 Km

  • National highways constructed in FY18

    9,829 Km

  • % of GDP on logistics & transportation

    13 - 15%

  • No. of PPP road projects awarded

    742

Key policies

7-phased National Highway Development Project

National Highways Development Project is being implemented in all phases except phase VI at present. The present phases improving more than 49,260 km of arterial routes of NH Network to international standards.
 

Bharatmala Pariyojana

Bharatmala Pariyojana is a new umbrella program for the highways sector that focuses on optimizing efficiency of freight and passenger movement across the country by bridging critical infrastructure gaps through effective interventions like development of Economic Corridors, Inter Corridors and Feeder Routes, National Corridor Efficiency Improvement, Border and International connectivity roads, Coastal and Port connectivity roads and Green-field expressways. A total of around 24,800 km are being considered in Phase I. Estimated outlay for Phase I is Rs 5,35,000 crores spread over 5 years. The objective of the program is optimal resource allocation for a holistic highway development/improvement initiative.

Monetization of Operational National Highways

National Highways Authority of India (NHAI) is monetizing public funded National Highway (NH) projects which are operational and are generating toll revenues for at least two years after the Commercial Operations Date (COD) through the Toll Operate Transfer (TOT) Model. Around 75 operational NH projects completed under public funding have been preliminarily identified for potential monetization using the TOT Model.

FDI Facts

  • FDI inflows (in USD) during April 2000 - December 2017 for Construction development: Townships, housing, built-up infrastructure and construction-development projects.

  • FDI equity inflows (in USD) from 2014 – 2017 for Construction development: Townships, housing, built-up infrastructure and construction-development projects.

  • FDI allowed under automatic route.

Recent Investments

  • March 2018 - IRB Infrastructure Developers has bagged a USD 511 mn road project from the NHAI in Uttar Pradesh to be developed on build, operate and transfer basis

  • March 2018 - Sydney based infrastructure asset management company, Macquarie won the rights to manage 648 km of national highways for USD 1.45 bn.

  • December 2016 - Spanish infrastructure firm Abertis Infraestructuras SA has agreed to buy two operational toll road assets in south India from Macquarie Group Ltd for about USD 150 mn.

  • August 2016 - A consortium of investors led by Goldman Sachs Inc. has agreed to invest USD 220 mn in Essel Highways, the road infrastructure holding company of Subhash Chandra controlled Essel Group.

  • December 2015 - I Squared acquired 100% of Jaipur Mahua Tollway Pvt Ltd (JMTPL) from Malaysia-based IJM Corporation for about USD 85 mn.

  • August 2015 - Brookfield Asset Management made its first significant investment in Indian infrastructure, buying six road and three power projects from Gammon Infrastructure Projects Limited for USD 1 bn.

Major Investors