Posted on 10/26/2017 5:17:21 PM PDT by Tolerance Sucks Rocks
In a fillip to India’s highway development programme, the Union cabinet chaired by Prime Minister Narendra Modi on Tuesday approved a plan to build thousands of kilometres of roads and highways over the next five years at a cost of about Rs 7 lakh crore, a spending push that could help generate jobs and lift the economy.
Announcing the Cabinet decision, Union finance minister Arun Jaitley called this public expenditure on infrastructure projects as “unprecedented” and “something which has not happened in the country till date.”
The plan involves constructing 83,677 km of roads, highways, green-field expressways and bridges in phases.
Under the first phase to be completed by 2022, 34,800 km of highways will be built. This will include 24,800 km of the ambitious Bharat Mala programme, at a cost Rs 5.35-lakh crore, announced two years ago, to build highways through economic corridors centred around manufacturing hubs, inter-corridors and feeder routes, border, coastal and port connectivity roads. 1,837 km of greenfield expressways will also be developed under the programme.
Of the 34,800 km stretch, 10,000 km are part of the ongoing National Highway Development Project (NHDP), which was started in 1998 when Atal Bihari Vajpayee was the PM.
The Modi government, like the previous NDA government, has given top priority to the sector that has hit a rough patch since 2007. The government has set an ambitious target of building almost 40 km of roads per day – up from 9km/day just three years ago – this fiscal. Between 2014-15 and 2016-17, the overall allocation to the highways sector has increased by 73 % — from Rs 1.3 lakh crore to Rs 2.25 lakh crore.
Infrastructure experts are happy that the momentum to the sector has continued. Sponsored Video Office Snacks Out Of The Box Sponsored by ZINC
“It’s the best stimulus that the government can come up with. It is heartening that the government is treating the highways as the single biggest stimulus related activity. The sector is highly construction dependent and the biggest multiplier to the economy. It will provide a robust road network resulting in economic spin-off,” said Vinayak Chatterjee, chairman of infrastructure consulting firm Feedback Ventures.
Finance secretary Ashok Lavasa said the government is looking to raise almost half the money from the market and private investments while the rest would come from the Central Road Fund, highway toll and monetising completed highway stretches.
The Centre’s move might be aimed at increasing government spending on creating infrastructure but economists are wary of the state’s capacity to spend.
“My first concern is the government’s ability to give out contracts and build the highway. If the past is an indicator, the state capacity to spend on public investment is limited,” said Ila Patnaik, professor, National Institute of Public Finance and Policy.
But ramping up government spending, at a time when subdued tax collections and sluggish economic growth have strained federal revenues, could widen the fiscal deficit beyond the targeted 3.2% of GDP.
There were signs that the government had little option but to spend its way out of trouble that was exacerbated, in part, by last year’s shock withdrawal of high-value banknotes as well as disruptions following the rollout of the new Goods and Services Tax.
In the last three-and-a-half years, the government has taken a slew of policy initiatives to raise revenue and lure back the private sector to invest in highways sector. With the appetite for public private partnership projects going down, the highways ministry decided to first move to the EPC (engineering procurement contract) model where the government funds the entire project.
According to credit rating firm Crisil, the construction sector was the most labour-dependent among all non-agricultural sectors.
By Express Web Desk
Bharatmala Project, which was given the nod by the Union Cabinet on October 25, is one of the biggest highway construction projects in India in history. The government plans to get the project rolling by December next year.
Bharatmala Project, which was cleared by the Union Cabinet on October 25, is the second largest highways construction project in the country since NHDP, under which almost 50,000 km or highway roads were targeted across the country. Bharatmala will look to improve connectivity particularly on economic corridors, border areas and far flung areas with an aim of quicker movement of cargo and boosting exports.
The project is expected to create nearly 100 million man days of jobs during the road construction and subsequently 22 million jobs as a result of the increased economic activity across the country. The construction will be billed via several routes including debt funds, budgetary allocation, private investment, toll operator transfer model etc.
Bharatmala includes economic corridors of around 9,000 km, inter-corridor and feeder routes of around 6,000 km, 5,000 km roads under the National Corridors Efficiency Program, border and international connectivity roads of around 2,000 km, coastal and port connectivity roads of around 2,000 km, expressways of around 800 km and 10,000 km of NHDP roads. The total length in phase 1 comes to around 34,800 km.
Bharatmala project will start in Gujarat and Rajasthan, followed by Punjab and subsequently traversing the Himalayan belt through Jammu and Kashmir, Himachal Pradesh, Uttarakhand, parts of Uttar Pradesh, Bihar, West Bengal, Sikkim, Assam, Arunachal Pradesh, Manipur (next to the Indo-Burmese border) and then to Mizoram. Northeastern states have been given special focus in the project and international trade is a key aspect as well.
The newer roads are expected to increase the speed of vehicles and decrease supply chain costs from the current average 18 per cent to six per cent. The Union Cabinet gave the nod to two big ticket infra projects on Tuesday with an outlay of Rs 6.92 lakh crore out of which Bharatmala Pariyojana shared Rs 5.35 lakh crore. It will also subsume 10,000 km roads under the National Highway Development Project (NHDP) program.
While the country reels under the impact of GST and demonetisation, Gadkari presented a meticulous plan to cut down costs and create jobs. “Bharatmala will bring down logistics cost, impacting exports and investment,” Gadkari said.
The main agencies tasked with the construction are the National Highways Authority of India, National Highway and Industrial Development Corporation and state public works departments.
By Manu Balachandran
After almost three-and-a-half years in power, the Narendra Modi government is making an audacious bet on infrastructure to try and kickstart India’s sputtering economy.
In the next five years, the government plans to build 83,677 kilometres (km) of roads by spending a staggering Rs7 lakh crore ($108 billion). This is the largest-ever outlay for road construction in India and the length of the proposed roads is more than twice the Earth’s circumference (around 40,000km). In all, India has about 96,260km of national highways, while the total length of all roads is about 3.3 million km.
The plan includes the Bharatmala Pariyojana, involving an extensive highway network of 34,800km connecting India’s western border to the eastern one, with a likely investment of Rs5,35,000 crore. Another Rs157,000 crore will go towards building 48,877km of roads by the state-run National Highway Authority of India (NHAI) and the ministry of road transport and highways.
“The huge spending on infrastructure announced today will give a fillip to private sector investment,” finance minister Arun Jaitley said in a press conference on Oct. 24.
India, the world’s fastest-growing economy until earlier this year, hit an air pocket after the Narendra Modi government decided to demonetise two of the country’s high-value currency notes last November and introduced a new tax regime in July. Private investment and consumption have shrunk while industrial production has remained low. The agriculture sector, too, has been in the doldrums. So it’s now up to the government to increase public sector spending to turn around the economy.
India’s road sector began recovering only recently from years of stagnation. Between 2012 and 2014, the government could only award 5,000km of road projects. Prime minister Modi, on the other hand, promised to build 41km a day after he came to power. However, his government has been constructing only 25km a days so far, totalling around 8,200km in the last financial year. Given that performance, building 16,700km of roads every year for the next five years to meet the 83,677km target won’t be easy for the government.
This slow expansion is also due to a lack of private sector funding, even as the government has tried out various financing models. This includes the engineering, procurement, and construction (EPC) model where road-building is done by private developers and funded by the government. It has also devised the new hybrid annuity model wherein the government would share project costs with the private sector in a 40:60 ratio.
“The road sector has one of the highest economic and employment multiples in the country. In that sense, this is possibly the best stimulus that we can get,” Vinayak Chatterjee, chairman at Gurugram-based infrastructure services company, Feedback Infra said. “With most of these projects likely to be undertaken by EPC and hybrid annuity, and the involvement of numerous agencies such as the national highways authority and state road agencies, it is possible to achieve the target of 83,000km in the next five years.”
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