In a recent report by Icra Ltd., the cost of road projects under the Bharatmala Pariyojana (BMP) initiative has surged to ₹10.64 trillion, exceeding double the initial estimate. The average cost per kilometer now stands at ₹31.6 crore, mainly attributed to rising input prices and land acquisition costs.
The revised expense plan for Bharatmala Phase-I is pending approval from the Union cabinet, leading to a significant slowdown in awarding new projects. The volume of project awards has seen a substantial 48% year-over-year decline, totaling 2,595 km in the first seven months of FY24.
Icra estimates a further decline of more than 30% year-over-year in awarding activity for FY24. The Ministry of Roads and Transport and Highways (MoRTH) has shifted its focus to BOT (Toll) projects due to lower financial burden compared to the substantial cost escalation in BMP.
Despite a robust order book and a 10% growth in road construction in the current fiscal’s first seven months, the sluggish pace of awarding contracts in FY24 could impact road execution momentum for FY25 and FY26.
MoRTH has already allocated 64% of the budgeted outlay, amounting to ₹1.66 trillion, in seven months of FY24, indicating a potential improvement in overall execution by 16-21% in FY24.
