Higher commodity prices curb highway construction projects

A significant rise in commodity prices has taken a toll on the construction of highways in India.

During the first two months of the current fiscal year (FY), highway construction stood at just 21 km a day, compared to 24 km a day during the same period in the last FY and 29 km per day in FY22.

The pace of highway construction is higher than that of the Covid-19 pandemic year in the first two months of 2020. For FY22-23, the Ministry of Road Transport and Highways (MoRTH) had set a target of 50 km per day for highway construction.

In the April-May period of the current FY, a total of 1,307 km of highway has been constructed by all the implementing agencies, including the National Highways Authority of India (NHAI).

Analysts recorded a decline in the pace of construction due to high prices of construction materials like cement, steel and bitumen. The prices of such commodities have started lowering due to the onset of the monsoon might curb the pace of construction in the next two months.

The price hike and the high volatility in commodity prices, after witnessing a huge increase in the second half (H2) of FY22, have made some of the contractors wait and watch. It has affected the pace of execution of the projects in the first two months.

Lowering the prices of some commodities like steel, etc., the pace of execution should improve.

Project awards dropped to just 496 km in the April-May period of this FY, as against 663 km during the same period in the last FY and 747 km a year before. MoRTH aims to award an 18,000 km highway construction project in the current FY.

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Also read: Ways to deal with the current construction materials prices hike