ICRA: Bharatmala Pariyojana Programme to be completed in FY2028

ICRA expects a significant delay in the completion of Bharatmala Pariyojana programme (BMP). The rating agency informed that the awarding of the BMP is expected to be completed in FY2024 assuming yearly NHAI awards of ~6,000-6,500 km in FY2023. However, any significant decline in awarding in FY2024 as observed in FY2019, being an election year, may push the award completion to FY2025. Assuming an annual execution of ~4,500-5,000 km from FY2023 onwards, the BMP programme is expected to be completed in FY2028, a delay of six years from the initial envisaged completion date of FY2022. The major reasons for delay can be attributable to delay in land acquisition, significant rise in land acquisition cost, and the Covid-19 pandemic. The completion cost of BMP is estimated at Rs. 10.63 trillion after factoring in cost escalations up to December 2021 and is 99% higher than the initial estimates owing to substantial rise in land acquisition cost, and steep increase in input costs. The final completion cost would be further higher by atleast 15-20% given the impact of rise in commodity prices on construction costs.

Vinay Kumar G, Sector Head, Corporate Ratings, ICRA, said, “In line with the implementation plan, EPC and Hybrid Annuity Mode (HAM) accounted for 98% of total awards under BMP till date. In terms of funding mix, BMP initially envisaged ~40% each contribution from Internal & Extra Budgetary resources (IEBR) and gross budgetary support including toll collections & TOT proceeds with the balance 20% from private sector investment. However, given the relatively higher share of EPC, overall dependency on IEBR is on the higher side. So far, the funding mix was skewed towards debt. While the current borrowing level is close to the overall debt level initially envisaged for BMP; with significant increase in estimated completion cost of BMP, the government may look at raising additional debt at NHAI in case of any shortfall in other funding sources.”

ICRA noted that the central government had increased the budgetary allocation to NHAI by 106% to Rs. 1.34 trillion while reducing its incremental borrowings to nil for FY2023. Despite decrease in fuel cess in May 2022, the allocation to road ministry is expected to remain at budgeted levels and thereby supporting awards and execution. Given the strong pipeline of operational road projects, ramp-up in asset monetisation becomes critical for funding the balance BMP cost in addition to continued budgetary support.

Announced in July 2015, BMP involves the development of 24,800 km of national highways and a residual 10,000 km of highways pending under the erstwhile National Highway Development Program (NHDP) by FY2022, at an estimated outlay of Rs. 5.35 trillion translating to cost of Rs.15.52 crore per km. The programme is being implemented by three agencies, namely, the National Highways Authority of India (NHAI), the Roads Wing of the Ministry of Road Transport & Highways (MoRTH), and the National Highways & Infrastructure Development Corporation Limited (NHIDCL) with majority of the project awarding under BMP being undertaken by the NHAI. During the last seven years, around 60% (20,632 km vs 34,800 km) of highway length has been awarded as of December 2021. As of March 2022, ~23% (8,134 km vs 34,800 km) of the total length under BMP has been completed.