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Road projects under Bharatmala Pariyojana see costs surge as input prices rise


New Delhi: The cost of road projects under the Bharatmala Pariyojana (BMP) initiative has increased. 10.64 trillion, more than double the original estimate, with average costs 31.6 crore per km, mainly due to increase in input prices and cost of land acquisition, rating agency Icra Ltd. said. in a report on Monday.

With the revised expenditure plan for Bharatmala Phase I awaiting Union cabinet approval, the award of new projects has slowed down considerably. As a result, the number of project awards fell by 48% year-on-year (YoY), totaling 2,595 km in the first seven months of FY24, compared to 5,007 km awarded in the year-ago period.

According to Icra estimates, award activity is expected to decline by more than 30% YoY in FY24.

“…The burden on the Ministry of Roads and Transport and Highways (MoRTH) in case of BOT (Dola) projects is much lower, considering the significant increase in costs in the BMP and the consequent increase in the requirement funded. Hence the MoRTH shifted its focus to BOT (Toll) projects,” said Ashish Modani, Vice President & Group Head, Corporate Ratings, Icra.

The average number of bidders for engineering, procurement and construction (EPC) and hybrid annuity model (HAM) projects was significantly higher at 15 and eight, respectively, compared to less than five for BOT projects, which require more initial equity more and carries more. market risk.

However, the transition to BOT projects could be a challenge given the limited number of technically qualified bidders and reduced appetite for such projects, Icra said.

Despite a strong order book for road developers and 10% growth in road construction in the first seven months of the current fiscal, the slow pace of contract awards in FY24 could dampen the momentum in road completion for FY25 and FY26, which Modani said.

However, MoRTH has already allocated 64% of the budgeted expenditure, which is 1.66 trillion, in seven months of FY24, an increase of 14% YoY, indicating a potential improvement in overall execution of 16-21% in FY24.

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Updated: 20 November 2023, 05:44 PM IST

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