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Highways to Tomorrow: Navigating the<br>National Infrastructure Pipeline

Highways to Tomorrow: Navigating the
National Infrastructure Pipeline

“Well-constructed roads are the threads that weave a nation together. They connect not only cities and towns but also the dreams and aspirations of the people, fostering unity and progress.”

-Aung San Suu Kyi

Former State Counsellor of Myanmar and 1991 Nobel Peace Prize Laureate

Infrastructure acts as the lifeblood of a nation, influencing economic activities, connectivity, and social cohesion. The construction and maintenance of robust transportation networks, particularly roads and highways, play an integral role in connecting regions, facilitating trade, and fostering overall development.

This article embarks on a comprehensive exploration of India’s National Infrastructure Pipeline (NIP), with a focused lens on the Roads and Highways infrastructure. We will delve into the data that defines India’s road network, unravel the intricacies of the NIP, and analyze the economic dimensions, including costs, overruns, delays, and the overall progress of this transformative initiative.

According to the Global Infrastructure Outlook 2017 report by Oxford Economics, there is a projected need for $94 trillion in global infrastructure investment from 2016 to 2040. Approximately half of this anticipated investment is concentrated in Asia, with significant contributions from China, India, and Japan. The majority of these investment requirements, about 67%, are earmarked for the roads and electricity sub-sectors.

According to the Task Force Report of the National Infrastructure Pipeline, established to identify, analyze, and recommend reforms in the infrastructure sector within the framework of the NIP, there is an estimation that India must invest $4.5 trillion in infrastructure by 2030. This investment is deemed necessary to maintain its growth rate and achieve the goal of a $5 trillion economy by 2025.

The National Infrastructure Pipeline was launched by the Government of India in 2019, with the primary goal of rejuvenating the country’s infrastructure across various sectors. The NIP sought to address longstanding challenges, accelerate project implementation, create employment opportunities, and stimulate economic activity. It aimed to lay the groundwork for holistic and sustainable development by targeting critical sectors such as roads and highways, urban infrastructure, energy, irrigation, etc.

The National Infrastructure Pipeline (NIP) was formulated using a bottom-up approach, encompassing the inclusion of all projects exceeding Rs 100 crore per project.

 This included projects in various stages such as under construction, proposed greenfield projects, brownfield projects, and those in the conceptualization phase. NIP  presents numerous opportunities for foreign investment and involvement.

Capital outlay over FY20-FY25 (Rs crore)

Source: Report of Task Force on NIP, Vol III-A

The NIP commenced with 6,835 infrastructure projects. Over time, it has expanded to include more than 9,000 projects spanning 35 sub-sectors, encompassing economic and social infrastructure. 

These projects are a collaborative effort involving funding from the Central Government, State Governments, and the private sector. 

The total capital expenditure in infrastructure sectors in India during fiscal years 2020 to 2025 is projected at ~Rs 111 lakh crore, with ~Rs 20.3 lakh crores (18%) of expenditure projected for the roads and highways segment, as shown in the following figure.

Sector-wise break-up of capital expenditure of Rs 111 lakh crore during fiscals 2020-2025

Source: Report of Task Force on NIP, Vol I

India possesses the world’s second-largest road network, spanning approximately 63.32 lakh km. This includes National Highways, Expressways, State Highways, Major District Roads, Other District Roads, and Village Roads. Some of the key associated bodies in this sector include National Highways Authority of India (NHAI), National Highways & Infrastructure Development Corporation Ltd. (NHIDCL), Indian Academy of Highway Engineers (IAHE), Indian Roads Congress (IRC), and National Highway Logistics Management Limited (NHLML).

Source: Annual Report 2023, Ministry of Road Transport and Highways, GOI

In India, the planning of road infrastructure is a multifaceted process influenced by various determinants. Economic considerations drive the prioritization of highways connecting major economic hubs and industrial zones. Understanding traffic patterns is crucial for efficient planning, particularly in high-density urban areas. Connectivity in remote and underserved regions is emphasized to integrate these areas into the broader economic framework. 

Strategic considerations for national security, environmental sustainability, and public transport integration further shape decision-making. Public participation and feedback, technological advancements, funding constraints, policy adherence, and compliance with legal and regulatory frameworks are integral components of the planning process. Navigating these determinants requires a comprehensive and integrated approach to ensure that road infrastructure projects align with the diverse and evolving needs of the nation.

Roads of Partnership: Public & Private Sector Unite for Infrastructure Triumph

Two different routes are followed for implementation of the NIP: the Engineering, Procurement and Construction (EPC) route and the Public-Private Partnership (PPP) route. 

In simple terms, the EPC and PPP models of road construction in India differ in how projects are managed and funded. The EPC model is like hiring a contractor to build your house – the government pays a fixed amount to a company to design and construct the road. 

On the other hand, the PPP model is like renting a house – the private sector partners with the government to build and often operate the road. In PPP, the private partner invests money and shares the risks, and in return, they may collect tolls or receive payments from the government over time.

 The key distinction is that EPC involves the government paying a fixed amount upfront, while PPP involves a longer-term partnership with the private sector, where they invest and share responsibilities.

The PPP model, accounting for 40% of the total capital outlay from FY 2020-25 of the NIP  in India, stands as a beacon of transformative collaboration between the government and private enterprises. One of the fundamental virtues of the PPP model lies in its ability to leverage the strengths of both sectors – the government’s regulatory authority, public mandate, and access to funding, coupled with the private sector’s efficiency, innovation, and project management acumen.

Source: Report of Task Force on NIP, Vol III-A

One of the key attributes of PPP & EPC models within the NIP is its versatility. Its framework accommodates a spectrum of project types, from roads and highways to urban infrastructure, energy, and beyond. Each sector benefits from the specialized skills and resources that private entities bring to the table. In the realm of road infrastructure, for instance, public and private sector collaboration has facilitated the development of high-quality highways and expressways, often with reduced financial burdens on the government.

Furthermore, the NIP’s embrace of these models reflects an enlightened understanding of the evolving nature of infrastructure needs. In an era of rapid technological advancements and changing global dynamics, such innovative models allow for flexibility and adaptation. Private entities, driven by market dynamics and competition, are often at the forefront of adopting innovative technologies and sustainable practices. By integrating private sector expertise, the NIP ensures that India’s infrastructure is not just functional but also future-ready.

However, it’s crucial to acknowledge that such collaborative models are not without challenges. The complexities of contract structuring, regulatory frameworks, and the need for effective dispute resolution mechanisms necessitate a robust governance framework. The NIP’s enlightened approach involves continuous refinement and learning from international best practices to overcome these challenges.

Navigating the Roadmap: A Rollercoaster of Progress, Delays, and Costs in Infrastructure Development

According to the latest report by the Department of Economic Affairs, the distance of road constructed per day increased from 12 km / day in FY 15 to 30 km / day in FY 19. Nevertheless, the gap between targeted and achieved construction remained consistently high. 

Achievement targets set by MoRTH

Source: Report of Task Force on NIP, Vol II

Budgetary Quagmire: Unraveling the Enigma of Cost Overruns in Infrastructure Projects

The roads and highways segment has the highest amount of cost and time overruns relative to all other infrastructural segments in India. As of June 2023, there were a total of 254 mega projects (costing Rs 1000 crores and above) and 787 major projects (costing between Rs 150 Crores to Rs 1000 Crores). This issue will be the prime focus of this article. 

According to the Infrastructure and Project Monitoring Division (IPMD), MoSPI, the original cost of mega projects and major projects were Rs 4,13,839.28 crores and Rs 3,39,408.86 crores respectively. The anticipated costs for these projects in July 2023 increased significantly, indicating cost overrun of 7.9% in mega projects and 1.8% in major projects.

The Flash Report of IPMD for the month of September 2023 for projects costing Rs 150 crores and above shows even more staggering figures. 

Out of 970 central sector infrastructure projects under road transport and highways sector, 183 incurred cost overruns, accounting for an amount of approximately Rs 43.7 thousand crores of additional cost. 

The pervasive issue of cost overruns in road infrastructure projects in India is a significant economic concern that demands scrutiny.The top 5 projects with highest percentage of overrun costs accounted for a surprising Rs 5521 crores of additional cost, which is 1090% of the original cost. 

List of projects with highest percentage of overrun costs

Source: IPMD Flash Report, MoSPI

Several factors contribute to these overruns, including delays in land acquisition processes, cumbersome bureaucratic procedures, and unpredictable regulatory challenges. Moreover, unforeseen geological and environmental issues often surface during the construction phase, necessitating costly adaptations. Poor project management, inadequate risk assessment, and an over-reliance on outdated cost estimates further compound the problem. 

The resulting cost escalations not only strain the financial resources allocated for the projects but also lead to a misallocation of taxpayers’ money. Addressing these root causes through streamlined processes, enhanced risk mitigation strategies, and proactive project management is imperative to ensure the judicious use of public funds and fortify the economic integrity of road infrastructure development in the country.

Roads to Nowhere: Navigating the Labyrinth of Time Overruns in Road Infrastructure

As on 1st October 2023, out of 970 major and mega infrastructure projects under road transport and highways sector, 451 are delayed with respect to their original schedules, and an astounding 106 are additionally delayed vis-a-vis their date of completion reported in the previous month. The time overruns ranged from 1 to 131 months in this sector.

List of Projects with Highest Time Overruns (TOR)

Source: IPMD Flash Report, MoSPI

The highest TOR of 131 months was taken by 4-Laning of Chhapra-Hajipur NH. The causes of this delay, according to the answer of Shri Nitin Gadkari, Minister of Road Transport and Highways in the Rajya Sabha on 18 Nov 2019 were “Land Acquisition issues, Liquidity issues with concessionaire” due to “Delay on part of both NHAI and Concessionaire”.

 The detrimental economic consequences of delays in implementing infrastructure projects cast a looming shadow over the fiscal landscape. Each day of postponement translates into a compounding cost burden, resulting in escalated construction expenses, increased labor and material costs, and heightened financial risks. The protracted delays of 451 projects punched a substantial hole in taxpayers’ pockets, draining a humongous amount of Rs 28 thousand crores from public funds.  

Delay-induced inflationary pressures exacerbate the economic toll, inflating the original project estimates and eroding the purchasing power of public funds. Such inefficiencies not only undermine the intended economic stimulus but also contribute to the opportunity cost of unrealized socio-economic benefits. Urgent attention to expeditious project execution is imperative to mitigate the hemorrhaging of taxpayers’ money, ensuring optimal utilization and safeguarding the economic resilience of the nation.

Intractable Impasses: The Economic Dilemma of Land Acquisition Challenges for Road Construction Projects in India

The National Infrastructure Pipeline (NIP) in India, designed to be a transformative force in the nation’s infrastructure development, has encountered a formidable challenge in the form of incomplete projects due to complications in land acquisition and often unresolved disputes.

Land acquisition challenges under the NIP arise from a myriad of factors. The complex legal procedures involved in obtaining land, coupled with the necessity to address concerns from local communities, have resulted in protracted negotiations and delays. The intricate process of obtaining consent from landowners, navigating through bureaucratic hurdles, and ensuring compliance with environmental regulations has led to administrative bottlenecks that hinder the timely commencement and completion of projects.

The social and cultural significance of the land to local populations further complicates the issue. Concerns about displacement, loss of livelihoods, and the environmental impact of large-scale infrastructure projects often lead to resistance from affected communities. The perceived lack of transparency in compensation mechanisms and rehabilitation measures exacerbates tensions and contributes to the prolonged negotiation processes.

The consequences of incomplete projects due to land acquisition challenges are significant. They disrupt the intended flow of traffic, causing congestion and delays that impact both daily commuters and businesses reliant on efficient transportation networks. Moreover, the economic benefits expected from these projects, such as improved trade routes and reduced logistical costs, remain unrealized, hampering overall economic growth.

Addressing the issue of incomplete projects due to land acquisition challenges under the NIP requires a multifaceted approach. Reforms in land acquisition laws are crucial to simplify the process and ensure a fair and transparent compensation mechanism. Proactive community engagement, where concerns are addressed and local stakeholders are involved in decision-making processes, can mitigate resistance and facilitate smoother project execution.

Administrative efficiency is paramount in overcoming these challenges. Streamlining regulatory procedures through a unified clearance system would reduce bureaucratic hurdles, fostering a more expeditious project timeline. Exploring innovative models such as land pooling and leasing could provide collaborative solutions that involve landowners as partners in the development process.

While the NIP holds immense potential for reshaping India’s infrastructure landscape, the issue of incomplete projects due to land acquisition challenges poses a formidable threat. A comprehensive and collaborative approach, encompassing legal reforms, community engagement, and administrative streamlining, is essential to overcome these hurdles and ensure the successful implementation of the NIP’s objectives. Resolving these challenges is not only vital for the immediate infrastructure goals but is also critical for fostering a sustainable and well-connected future for India.

Mastering the Roadmap: Decoding the Puzzle of Determinants in Infrastructure Planning

In the Indian context, the planning of road infrastructure involves a complex interplay of various determinants to address the diverse needs of the nation. Several key factors influence the decision-making process and shape the planning of road infrastructure in India:

  • Economic Considerations
  • Traffic Patterns and Demand
  • Connectivity and Accessibility
  • Strategic and Defense Considerations
  • Environmental Sustainability
  • Public Transport Integration
  • Land Use Planning
  • Public Participation and Feedback
  • Technological Advancements
  • Funding and Budget Constraints
  • Policy Framework
  • Legal and Regulatory Framework

In navigating these determinants, the tricky part of policy making is developing frameworks which address and optimize all the above factors, based on a comprehensive and integrated approach that perfectly balances the economic, social, environmental, and strategic aspects to meet the diverse and evolving needs of the nation.

Road to Tomorrow: Paving the Future of Road Infrastructure

The way forward involves a strategic focus on efficient project management, timely execution, and sustained collaboration between the public and private sectors. NIP’s future success hinges on addressing challenges like cost and time overruns through streamlined policies, transparent processes, and risk-sharing mechanisms. 

Several policy changes are imperative. Firstly, a streamlined and transparent land acquisition process can mitigate delays, reducing both time and cost implications. Implementing robust risk assessment mechanisms and incorporating realistic timelines in project planning is essential. 

Additionally, the NIP can benefit from continuous engagement with the private sector, fostering a collaborative approach that aligns incentives and shares risks effectively. Furthermore, creating a conducive environment for PPPs requires addressing regulatory complexities, ensuring fair risk-sharing mechanisms, and establishing effective dispute resolution mechanisms.

A flexible policy framework that adapts to evolving technological and economic landscapes is crucial, enabling the incorporation of innovative solutions and sustainable practices. 

Emphasizing post-construction maintenance strategies can also safeguard against long-term costs and ensure the longevity of infrastructure assets. 

The NIP’s future prospects depend on a proactive and adaptive policy framework that not only addresses current challenges but anticipates and accommodates the dynamic needs of India’s evolving infrastructure landscape.

Smriti Saxena

Smriti Saxena is a Research Intern at Tatvita Analysts. She is pursuing her Bachelors in Economics.

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