‘Over half the national highways under hybrid annuity model severely delayed’

Bengaluru: There is a heightened execution challenge amongst under-construction National Highways Hybrid Annuity Model (HAM) projects.

About 55% worth of projects, with an aggregate bid project cost (BPC) of Rs 1 lakh crore, have been delayed beyond six months, as of December 2024, according to a report by analytical group CareEdge out on Friday.

This is up from around 33% of the projects that were delayed as of June 2023.

CareEdge Ratings forecasts a nearly 7-10% decline in the pace of National Highways construction in the financial year 2024-25 (FY25) compared to FY24. The construction rate is expected to have slowed from 12,350 km in FY24 to 11,100-11,500 km in FY25, closer to nearly 31 km/day.

The highways sector has witnessed a combination of a rise in project complexities, participation from sponsors with moderate capabilities and significant delays in receipt of appointed dates after projects are awarded, contributing to a slackened construction pace.

Prominent factors contributing to these delays include a standard construction period of two years regardless of project complexities, heightened competitive intensity, non-availability of hindrance-free right of way (RoW), and excessive rainfall.

The sponsor profile continues to be diverse across the delayed projects. While grant of extension of time (EOT) mitigates the project specific risk to an extent, it impacts overall construction pace and profitability of roads developers.

Projects with a BPC exceeding Rs 40,000 crore have been awaiting their appointed dates for over a year since being awarded, as of December 31, 2024. The primary reason for the prolonged delays in receiving the appointed dates is the intensified focus on greenfield expressways and highways, which has compounded land acquisition challenges.

The HAM model has consistently been the preferred mode for awarding highway projects, accounting for nearly 55% of the total projects awarded between FY21 and FY24.