The Indian government is set to maintain its emphasis on rapid infrastructure development in the current fiscal year, with plans to potentially raise capital expenditure allocations for the Ministry of Road Transport and Highways (MoRTH) in the upcoming budget for FY25, as reported by Mint.
The anticipated increase in allocations is expected to be moderate, ranging between 5 percent and 10 percent above the revised estimates for FY24. This adjustment aligns with the government’s strategy to capitalize on a projected surge in private sector investments in road construction projects, particularly under the build-operate-transfer (BOT) toll model. Private investments in FY24 amounted to Rs 34,805 crore and are forecasted to nearly double in FY25, rising from Rs 20,000 crore in FY23.
The BOT toll projects enable private sector entities to assume construction risks and invest in road development, thereby alleviating the burden on government expenditure. Approximately 20-25 percent of highway projects this fiscal year are expected to be awarded under the BOT toll model, underscoring the strategy to optimize infrastructure spending.
In the interim budget presented earlier this year for FY25, the government had already raised MoRTH’s allocation to Rs 2.72 trillion, up from Rs 2.64 trillion in revised estimates for FY24 and Rs 2.58 trillion in FY23. The forthcoming full budget for FY25, slated for late July, is likely to see further incremental increases in MoRTH allocations.
The augmented budgetary provision aims to accelerate highway construction efforts and address the significant debt burden of Rs 3.5 trillion accumulated by the National Highways Authority of India (NHAI) by the end of FY24. The government targets the construction of 12,000 to 13,000 km of national highways and plans to award contracts for similar stretches to sustain the momentum in highway development in the coming years.
To enhance private sector participation, amendments have been introduced to the BOT toll model concession agreement. These amendments aim to improve the accuracy of traffic estimation and bolster lender interest in financing such projects, according to assessments by CRISIL. Rating agencies CRISIL and India Ratings and Research highlight that while budgetary allocations in the roads sector have exhibited robust growth over the past decade, the current strategy emphasizes greater involvement of the private sector in infrastructure development.
As India navigates its infrastructure ambitions, the government’s proactive measures underscore its commitment to fostering sustainable growth through strategic investments in critical sectors like transportation and road infrastructure.
