Highway construction slows in Q1 on high input costs

Elevated commodity prices have slowed construction of national highways in the first quarter of the current financial year. The pace of construction stood just at 22 km a day in the quarter, less than 25 km a day recorded in the same period last fiscal. The pace was 29 km per day in the whole of FY22.

The current year’s construction speed however is higher than recorded in the pandemic-hit first quarter of FY20. 

For the 2022-23 fiscal, the ministry of road transport and highways (MoRTH) has set an “aspirational target” of building highways at 50 km a day. It translates a little over 18,000 km for the entire fiscal.

During the April-June period of the current year, around 2,000 km highway has been constructed by all implementing agencies including the National Highways Authority of India (NHAI), sources said.

Officials in the ministry said that the pace of construction will pick up in the third and fourth quarters of the current fiscal, as always.   

Analysts, however, said the decline in the pace of construction in the first half of the current fiscal is mainly due to elevated prices of construction materials like cement, steel and bitumen. They also believe that even as the price of such commodities have started colling off in recent times, the onset of the monsoon might impede the pace of construction in the next two months or so.   

“Notwithstanding the price escalation clauses in the agreement; the high volatility in commodity prices after witnessing a huge increase in H2 FY2022 has made some of the contractors to be on a wait and watch mode. Consequently, this has affected the pace of execution in the first two months,” said ICRA’s Rajeshwar Burla.

“With prices of some of the major commodities like steel etc. cooling off in last couple of weeks, the pace of execution should improve. However, unfortunately now we are heading into monsoon season and therefore it may not result in tangible improvement in execution pace,” he said.

Highway project awards also declined to just 969 km in the April-June period of the current fiscal as against 1,681 km in the same period last fiscal and 1,658 km a year before. MoRTH targets to award 18,000 km highway project length in the current fiscal as well.