NHAI projects likely to fall short by 33-37% of its FY19 target, says Icra

Despite the pace of highways projects undertaken by state-run National Highways Authority of India (NHAI) picking up in the last three years, it is likely to remain short by 33-37 per cent of its FY19 target of completing 6,000 km, says Icra.

With a strong unexecuted pipeline and concerted efforts on right of way, the NHAI is on a strong footing and is set to witness sustained growth in execution in FY2019, the highest ever over the last one decade (FY2010- FY2019), the agency said in a statement issued on Monday.

As on March 31, 2018, NHAI has around 15,000 km of portion, which included projects awarded over the last five years, under completion.

"The majority of the NHAI awarded projects in the past three years are on track as far as completion deadline is concerned and have not encountered any land acquisition challenges. The execution has also increased at a CAGR of 27 per cent to 3017 km in FY2018 from 1500 km in FY2015," it said.

NHAI's actual execution during H1 FY2019 is estimated to be in the range of 1,300-1,400 km and considering that execution is typically lower in first half of the fiscal due to monsoon, Icra estimates full year execution to be in the range of 3,800-4,000 km, though the same will remain short by 33-37 per cent of its FY19 target of completing 6,000 km.

However, pending appointed date (AD) for the hybrid annuity model (HAM) projects should not be seen as a concern when financial closure has already been achieved, the report said.

"For some of the projects, there was a delay in announcing the appointed date, despite achieving financial closure due to the lack of possession of 80 per cent of the right of way. However, in most of these projects, the land acquisition has reached the advanced stage."

"As compensation is paid out, the developers are fully geared up with all the pre-construction activity including resource mobilisation and surveys. Once the AD gets declared we would see substantial progress on the work front for these projects." Icra vice-president and Group head, corporate ratings Shubham Jain said.

Icra further noted that the other reasons for slippage on the awards front, particularly when the awards itself are low, they were only 892 km in Q1 FY2019 as against the target of 20,000 km for the ministry of road and highways.

"The awards activity usually picks up substantially during the fourth quarter. Though, given the general elections in 2019, new award activity is likely to get affected in Q4FY2019 and Q1FY2020," it said.