Last fiscal proves stellar for road & highway sector

The financial year 2020-21 has turned out to be outstanding for the road and highway sector. A record 13,298 km of highways were constructed in that period, as against around 10,240 km in FY20, which made for 30% y-o-y growth and a pace of 36.4 km/day. On the award front, 10,467 km of projects were awarded, up 17% over 8,948 km in the preceding year. A host of industry-friendly measures taken by the government added to this steely performance, with analysts holding that continuation of measures to boost liquidity and relaxation in norms for bidders could see construction pace crossing the 40 km/day mark in the new fiscal. The performance of the Nitin Gadkari-led highway ministry is especially commendable given that no construction activity was allowed in the first 20 days of April 2020, owing to the Covid-induced lockdown. To boost cash flows for contractors in the pandemic-hit months, the ministry reduced the quantum of the performance guarantee and released the excess money. It also released all pending payments and nudged companies to achieve mandated milestones and receive payments speedily. Jagannarayan Padmanabhan, director of CRISIL Infrastructure Advisory informed that these measures boosted the confidence of sector players, leading to brisk activity.

ICRA's Rajeshwar Burla said that the relief measures like a shift from milestone-based billing (typically ranging between 45 and 75 days) to monthly billing and release of retention money or performance security in proportion to the work already executed, among others, helped contractors immensely by reducing the cash conversion cycle. Due to the improved cash conversion cycle for the Ministry of Road Transport and Highways (MoRTH)/National Highways Authority of India (NHAI) projects, many road contractors made special arrangements to facilitate the return of labour, notwithstanding the high costs involved. As a result, execution witnessed a sharp improvement, with liquidity-boosting measures aiding it further. Besides, the robust project monitoring system the ministry has evolved over recent years and its proactive approach to resolving issues contributed to last year's performance. Availability of land and less traffic on highways because of the pandemic also helped speed up construction levels.

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Last fiscal proves stellar for road & highway sector

NBM Media

NBM Media

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