OVERVIEW | OPPORTUNITIES

Roads

 

OVERVIEW

SIZE

• India has an extensive road network of 3.3 million km – the second largest in the world
• Roads carry about 65% of the freight and 80% of the passenger traffic
• Highways/Expressways constitute about 66,000 km (2% of all roads) and carry 40% of the road traffic
• The Government of India plans to spend about US$10 billion p.a. on road development over the next five years
• The ambitious 7-phase National Highway Development Project (NHDP) is India’s largest road project ever. Phase II, III and IV are under implementation
  • Key sub-projects under the NHDP include:
    • The Golden Quadrilateral (Phase I: GQ-5846 km of 4 lane highways)
    • North-South & East-West Corridors (Phase II: NSEW-7300 km of 4 lane highways)
• Program for 6-laning of about 6500 km of National Highways is underway

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STRUCTURE

• The National Highways Authority of India (NHAI) is the apex government body for implementing the NHDP
  • All contracts, whether for construction or BOT, are awarded through competitive bidding
• Private sector participation is increasing and is through:
  • Construction contracts
  • BOT for about 36% of total investment-based on competitive bidding or the lowest lumpsum payment from the Government.
    • BOT contracts permit tolling on those stretches of the NHDP

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POLICY

• 100% FDI under the automatic route is permitted for all road development projects
• Incentives:
  • 100% income tax exemption for a period of 10 years
  • NHAI agreeable to provide grants/viability gap funding for marginal projects
  • Model concession agreements formulated

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OPPORTUNITY

Road development is a priority sector

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OUTLOOK

• Annual growth projected at 12-15% for passenger traffic, and 15-18% for cargo traffic
• Over US$90 billion investment is required over the next 5 years to improve road infrastructure
  • Road sector investments expected to grow at 19% p.a.

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POTENTIAL

• Road development is recognised as essential to sustain India’s economic growth
  • The government is planning to increase expenditure on road development substantially with funding already in place based on a cess on fuel
• A large component of highways is to be developed through public-private partnerships
  • Several high traffic stretches already awarded to private companies on a BOT basis
  • Two successful BOT models are in place – the annuity model and the upfront/lumpsum payment model
• 40% of India’s villages do not have access to All-Weather roads
  • The government has identified rural roads as one of the 6 components of the US$40 billion Bharat Nirman Programme to improve rural India
• Investment opportunities exist in a range of projects being tendered by NHAI for implementing the remaining phases of the NHDP – contracts are for construction or BOT basis depending on the section being tendered.

India has the second largest road network in the world	An annual growth of 12-15% for passenger traffic has been projected

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For additional information: Planning Commission, Government of India (planningcommission.nic.in), Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways (http://morth.nic.in), National Highways Authority of India (http://www.nhai.org)