Highway awarding and implementation are moving at a sluggish pace despite record-high infra tendering: Report

Highway awarding and implementation are moving at a sluggish pace despite record-high infra tendering: Report

According to the study, L&T (Rs 3.03 crore), BHEL (Rs 1.94 crore), and Polaris Smart Metering (Rs 0.52 crore) are the main receivers of these bids.

The JM Financial study claims that the sluggish increase in funding for water and roads is a result of the delayed project awards in FY2023–FY2024.

In January 2024, the infrastructure segment's tendering activity hit a record high, increasing by 48% year-over-year and 81% month-over-month (MoM) to Rs 20,500 crore. JM Financial claims that the National Highways Authority of India (NHAI) as well as Maharashtra State Road Development Corporation (MSRDC) engaged in "strong tender activities" that propelled the increase.

The procedure by which companies request bids or proposals from possible contractors is known as tendering. MSRDC (Rs 4,820 crore), NHAI (Rs 3,220 crore), The state Public Works Department (PWD) (Rs 2,200 crore), National Highways as well as Infrastructure Development Corporation Limited (NHIDCL) (Rs 740 crore), along with Public Health and Municipal Engineering Department, Telangana (Rs 350 crore) have been the main contributors to the tender issue in January 2024.

The research states that L&T (Rs 303 billion), BHEL (Rs 194 billion), and Polaris Smart Metres (Rs 52 billion) are the main receivers of these bids in the listed industry.

While bid pipeline improves, highway allocation is still poor

However, despite the rise in bidding, there are still delays in awarding and construction occurring in the industry, particularly in the highway sector. To award is to choose a bid, and to build is to carry out. According to JM Financial, highway development and allocation remained unsatisfactory for the 10MFY2024. There were around 3481 km allotted and 7,658 kilometres built during this time. The bid pipeline for roads and bridges has benefited to Rs 1.1 trillion - NHAI (Rs 1 trillion), EPC (Rs 46 billion), HAM (Rs 570 billion), along with BOT (Rs 389 billion) billion rupees – notwithstanding the poor awarding procedure.

Regarding NHAI, Uttam Kumar Shrimal, Senior Research Analyst - Cement & Infra, Axis Securities, has previously said in an interview with Moneycontrol that while the organization's debt load has grown over time, asset monetization is being considered. by cutting it down. Additionally, we want to provide additional projects at the BOT level that do not need NHAI financing. "With a good pipeline of projects, we fail to observe any problems in future growth," he said. An HDFC Securities study from October 2023 had a similar opinion. "We believe concerns about debt can be addressed from FY2031 onwards as NHAI can be used to meet its debt commitments on its own as well as fund increased NH capital expenditure," the report from HDFC Securities said. Sort of relies on the support of the budget."

low spending in the budget

While overall capital spending for the infrastructure sector increased by 17% to Rs 11.1 trillion in FY24, the roads, railways, and water segments received smaller allocations in the interim budget released on February 1. The JM Financial study claims that the sluggish increase in funding for water and roads is a result of the delayed project awards in FY2023–FY2024.