NHAI to miss its target by 33-37% for the year: ICRA

MUMBAI: National Highways Authority of India (NHAI) will clock its highest project execution in 2018-19 but will still miss its target for the year by 33-37 per cent, rating agency ICRA said in a note on Monday.

ICRA said that NHAI has a strong unexecuted pipeline and with its concerted efforts, it will witness sustained growth in execution in FY2019, the highest ever over the last one decade (FY2010- FY2019).

The majority of the NHAI awarded projects in the past three years are on track as far as completion deadline is concerned and have not encountered any land acquisition challenges.

“As per ICRA, the execution increased at a CAGR of 27 per cent to 3,017 km in FY2018 from 1,500 km in FY2015. NHAI’s actual execution during H1 FY2019 is estimated to be in the range of 1,300-1,400 km. Considering that, execution is typically lower in H1 due to monsoon, ICRA estimates full year execution to be in the range of 3,800-4,000 km, though the same will remain short by 33-37 per cent of NHAI’s FY19 target of completing 6,000 km,” ICRA said.

The rating agency also said that pending appointed date for the hybrid-annuity model (HAM) projects should not be seen as a concern when financial closure has already been achieved.

“For some of the projects, there was a delay in announcing the appointed date, despite achieving financial closure due to the lack of possession of 80 per cent of the right of way. However, it is to be noted that for a majority of these projects the land acquisition has reached the 3H stage (compensation is paid by NHAI) in which case possession is a matter of process. As compensation is paid out, the developers are fully geared up with all the pre-construction activity including resource mobilisation and surveys. Once the AD gets declared we would see substantial progress on the work front for these projects,” said Shubham Jain, Vice-President & Group Head, Corporate Ratings, ICRA.

The report said that there are other reasons for the slippage on the awards front; in particular when the awards itself are low, they were only 892 kms in Q1 FY2019 as against the target of 20,000 km for the ministry.

The awards activity usually picks up substantially during the fourth quarter. Though given the general elections in 2019, new award activity is likely to get affected in Q4FY2019 and Q1FY2020.