Experts claim higher competition in road sector can impact quality

The NHAI's speedy construction plans risk poor construction quality of roads, by various firms.

 Experts claim higher competition in road sector can impact quality

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• The story: As per experts of India Ratings and Research (Ind-Ra), higher competition in the road sector could impact the building quality. The firm said that increased competition in the road sector in FY21, resulting from the National Highways Authority of India's (NHAI) initiative to reduce prequalification requirements, may lead to a moderation in the quality of roads.
• Details: The agency found that alongwith higher order inflows, the sector witnessed an increase in competition, resulting in lower-than-expected bid prices. The NHAI's stated plan of action to monitor the execution closely, especially in cases of abnormally low bids, needs to be implemented strictly. Else, there will be a quick deterioration in quality.
• What firms are trying: The report cited that engineering, procurement and construction players were trying to increase their order book visibilities, backed by strong counterparties, to avoid the working capital lockups that could result from delayed realisations. The EPC players have started increasing their order books towards Central government or public sector entities, which have better financial profiles and are more prompt with respect to making payments.  This, along with the increase in budgetary allocations by the Central government in its budget towards the road space, and the fact that the NHAI is regarded as one of the most reputed counterparties, had heightened the competition in the sector.
• Knowledge centre:

1. Highway construction in India - Union Ministry of Road Transport and Highways said that India was constructing national highways faster than ever. As per numbers shared by Minister Gadkari, the annual average construction of national highways has recorded 83 per cent spike in what what was recorded during 2009-2014. Annual average construction of highways was 4,918 during 2009-2014, with 13 km per day. The number jumped to 8,993 with 25 km per day later. The target was 11,000 with 30 km per day but construction exceeded the target and achieved 13,327 with 37 km per day — 21 per cent higher that what what was targeted. India is now constructing 37 kms national highways per day.
2. Road network in India - India has the second-largest road network in the world, spanning a total of 5.89 million kilometres (kms). This road network transports 64.5% of all goods in the country and 90% of India’s total passenger traffic uses road network to commute. Road transportation has gradually increased over the years with improvement in connectivity between cities, towns and villages in the country. Highway construction in India increased at 17.00% CAGR between FY16-FY21. Despite pandemic and lockdown, India has constructed 13,298 km of highways in FY21. The government also aims to construct 23 new national highways by 2025. In April 2021, the NHAI decided to deploy Network Survey Vehicle (NSV) to enhance quality of the national highways. Carrying out road condition survey using NSV on the national highways was made mandatory for certifying completion of the project and every six months thereafter. 

 

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