Indian Road Construction Industry Scenario

Being a developing economy, the construction industry is a major driver for success. The road construction is being done on an average of 13 km per day under the Modi government as compared to 3 km in the last days of the UPA government. The government planned for Rs 3 lakh crore of road projects in current fiscal to meet the target of 30 km per day highway construction. The transport sector contributes 6 per cent of the Indian GDP out of which 70 per cent share comes from the road sector.

According to Petroleum Planning and Analysis Cell, bitumen import  has boosted by 96 per cent to 4.5 lakh tonne in FY15 from 2.3 lakh tonne in FY14. Being a low value product, domestic production for bitumen remained flat at 47 lakh tonne per year for last two years. The demand for bitumen will be 5971000 million tonne in current financial year according to twelfth financial plan.

The government has sanctioned 1427 projects in last three years. The current scenario is that 1022 projects are completed, 437 projects are running behind schedule, 101 projects are under dispute or arbitration and 57 projects are terminated. The government awarded 7980 km road projects in FY15 more than double compared to previous financial year. 

Other than upgrade and extending national highways, the government is planning key projects. Bharat Mala, a 5000 km road will be built from west to east border from Gujarat to Mizoram at a cost of Rs 50000 crore. This road will link all coastal states from Maharashtra to West Bengal. Another, 1000 km Chaar Dhaam Yatra project is planned and will connect holy towns at a cost of Rs 11000 crore.

The current 100 per cent FDI is allowed in road construction. The Indian government plans to set up a finance corporation with an amount of Rs 1 trillion in collaboration with Japanese investors to fund projects in the roads segment. The Japanese partners are expected to have a 26 per cent stake with assured returns of nine per cent.

The road infrastructure will boost other industries such as transportation & logistics sector, FMCG, automobile industry, realty, tyre and auto products, trade and tourism. The better connectivity will reduce time and cost for other industries. However, road infrastructure is suffering issues like land acquisition, environmental clearance, daily cash flow in the industry, debt burden on the companies.