Indian government tells Highways Authority: “Stop building roads”

The office of the Indian prime minister has written to the National Highways Authority (NHAI) to ask that it stop building roads and hand over the running of completed projects to the private sector.

The letter, written by Nripendra Misra, principal secretary to the prime minister, said the NHAI was "totally logjammed by an unplanned and excessive expansion of roads" leading to new projects becoming "financially unviable" and leading construction companies to withdraw from them.

It added that the present "hybrid annuity model", whereby the government and the private developer share the costs of construction, had become unsustainable. It suggested that the NHAI aggressively monetise its existing assets, either through auctioning off tolling rights to the private sector or by forming infrastructure investment trusts.

The letter, which only offers suggestions, reflects the government’s concern that a breakdown in road building will slow the country’s growth – already at its lowest point in five years. Road schemes are thought to comprise about 3% of gross value added to the economy.

Modi’s office now wants the NHAI to auction projects to the private sector on a build, operate, transfer model. The lack of private sector interest in this procurement route had pushed the government to allow the authority to accept the entire construction cost for some schemes.

The Times of India reports that the NHAI now has a total debt of around $25bn, a sevenfold increase in the past five years.

The cost of servicing this is almost $2bn a year, or $600m more than its total take in tolls.

The growth in debt follows an ambitious road building programme by Modi’s first government, which announced in 2017 that it would spend $108bn on 83,700km of road construction schemes over five years. Among the projects in the pipeline was the Bharatmala Pariyojana, an $83bn plan begun in 2015 to build 34,800km of roads to improve communications between west and east India.

Image: The Vijayawada-Guntur Highway (Pratapkagitha/CC BY-SA 4.0)

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