The National Highways Authority of India (NHAI) is witnessing a deepening slowdown in road awards, with the trend persisting into the current fiscal year. According to a recent report by Nuvama Institutional Equities, the outlook for FY27 remains challenging as private sector participation remains tepid and financing constraints persist.
Slowdown in Awards
Data indicates that road awarding by NHAI has slowed significantly in FY26, with only a fraction of the planned kilometers being awarded so far. The report highlights that the pace is notably lower compared to previous years, raising concerns about meeting the government's ambitious highway expansion targets.
Reasons for the Slowdown
- Weak Private Sector Interest: Developers are cautious due to high leverage and limited balance sheet capacity to take on new projects.
- Financing Challenges: Banks and financial institutions have become more selective in lending to road projects, given the stretched liquidity in the system.
- Land Acquisition Issues: Delays in land acquisition continue to hamper project progress, making new bids less attractive.
FY27 Outlook Remains Challenging
Nuvama's report warns that the challenges are likely to persist into FY27. The agency expects award activity to remain subdued unless there is a significant policy intervention or improvement in financial conditions. The report states that "the road sector is likely to see muted awarding over the next 12-18 months, with FY27 awards potentially falling below the government's target."
Impact on Infrastructure Growth
The slowdown in NHAI awards could have broader implications for India's infrastructure development. The government had set an ambitious target of awarding 12,000 km of national highways in FY25, but actual awards fell short. For FY26, the target is 10,000 km, but the current pace suggests another miss. This could delay the government's plan to expand the national highway network to 2 lakh km by 2025.
Potential Measures to Revive Awards
To address the slowdown, the government may need to consider measures such as:
- Enhancing the viability gap funding (VGF) to attract private players.
- Simplifying land acquisition processes.
- Providing easier access to credit for developers.
- Offering more hybrid annuity model (HAM) projects to reduce risk for developers.
Conclusion
The NHAI road award slowdown is a cause for concern, and the FY27 outlook remains challenging. While the government has taken steps to boost infrastructure spending, the private sector's cautious approach and financing constraints could continue to impede progress. A concerted effort from all stakeholders is needed to revive the awarding momentum and meet the country's infrastructure goals.
