Report on Indian Highway and Markets

By
Abhishek Srivastava
Electrical Engineering
500040186/R132214006
UPES, Dehradun
INDIAN ROADS & HIGHWAYS
Roads are an integral part of the transport system. A countrys road network should
be efficient in order to maximize economic and social benefits. They play a
significant role in achieving national development and contributing to the overall
performance and social functioning of the community. It is acknowledged that
roads enhance mobility, taking people out of isolation and therefore poverty. Roads
play a very important role in the socio-economic development of the country but
meanwhile this expansion also pose great challenges to the safety and security of
the travelling public. The road transport industry is the backbone of strong
economies and dynamic societies. It is therefore legitimate and indispensable to
safeguard an industry that is vital to economic growth, social development,
prosperity and, ultimately, peace and which plays a crucial role in everyones life
in industrialized and developing countries alike by meeting the demand for the
sustainable mobility of both people and goods. The road transport industry is
indeed instrumental in interconnecting all businesses to all major world markets,
driving trade, creating employment, ensuring a better distribution of wealth and
uniting mankind. It plays a crucial role in the daily economic and social life of
industrialized and developing countries alike. For this reason, any penalty on road
transport is an even greater penalty for the economy as a whole. An important part
of the road transport industrys story is sustainable progress.
With the economic development of infrastructure in India, the country has
progressed at a rapid pace and today there is an availability of wide variety of
modes of transport by land, water and air. But, overall Road Transport is the
primary and preferred mode of transport for most of the population and India's
Road Transport system is among the most heavily utilized system in the world. It
plays a pivotal role in the economic development of a nation by increasing the
productivity and competitiveness. Over the last five years (2012-03 to 2017-18)
Road Transport sector GDP grew at an annual average rate close to 12 per cent
compared to an overall annual GDP growth of 8 per cent. Road Transport serving
occupies an irresistible dominance within the transport sector with a share of 4.8
per cent in GDP compared to a too little 1.0 per cent share GDP in case of railways
(2015-2016). Also annual average growth in freight transport at 6.5 per cent for
road was much higher in comparison to railways which clocked a modest annual
average increase of 3.6 per cent during the past reforms phase (1992-93 to 2011-
12).
Efficient transport system for sustained economic
development:
An efficient road transport system is a pre-requisite for sustained economic
development. It is not only the key infrastructural input for the growth process but
also plays a significant role in promoting national integration, which is particularly
important in India. The transport system also plays an important role of promoting
the development of the backward regions and integrating them with the
mainstream economy by opening them to trade and investment. In a liberalized set-
up, an efficient transport network becomes all the more important in order to
increase productivity and enhancing the competitive efficiency of the economy in
the world market. Of the various modes of transport that connect the cities and
villages of the country, road transport constitutes the crucial link. Road
infrastructure facilitates movement of men and material, helps trade and
commerce, links industry and agriculture to markets and opens up backward
regions of India. In addition, the road system also provides last-mile connection for
other modes of transport such as railways, airports, ports and inland waterway
transport and complements the efforts of these modes in meeting the needs of
transportation. The road transport sector in India has expanded manifold in fifty
years after independence, both in terms of spread and capacity. The growth in the
importance of road transport within the transport sector is borne out by its growing
share in GDP. The share of road transport in GDP is presently 3.64 per cent which
accounts for a major share of all transport modes which contribute 7.51 per cent to
GDP and handles more than 60 percent of the freight and more than 80 percent of
the passenger traffic in India.

Investment Policy of Government of India:

The Government of India has laid great emphasis on the development of adequate
road network in India. A vision of expressways connecting far corners of India has
been projected. There is a need to up-grade the road system in India by widening
and strengthening the existing highways, reconstruction and widening of bridges
and provisions of user friendly improvements. It is obvious that this vital
infrastructure requirement would have to be developed with the private sector's
participation. Here is an overview of the government's investment policy towards
roadways.

The government has announced a series of far-reaching measures to promote

investment in roads. These measures include industry status to road sector,
exemption from import duty on identified high quality construction plant and
equipment, duty free import of bitumen permitted under OGL, automatic approval
for foreign equity up to 74 110 per cent and foreign commercial borrowing to the
extent of 30 per cent of the project cost has been permitted. There is no restriction
on the maximum equity holding by a foreign company in a joint venture to be set
up in India. The pre-qualification criteria, however, requires experience of the joint
venture partners in similar projects. India has finalized Investment Promotion and
Protection Agreements with over 30 countries. Therefore, setting up of a joint
venture or a 100 per cent foreign owned subsidiary qualifies as an investment. The
concept of direct tolling, viewed mainly as a user charge has already been
successfully implemented mainly on bridges and bypass roads and on four lane
National Highways. The developer assumes the majority of the risk associated with
design, construction, maintenance, operation and financing of the road. To
encourage private sector participation, the Govt. has introduced annuity approach
in which a fixed annual payment is made to the entrepreneur. Due to limitation of
the budgetary resources, the role and participation of private sector are to be
encouraged by and large for the development of National Highways. There is an
exemption for infrastructure funds from income tax on the incomes from Income
Tax dividend, interest on long term capital gains of such funds or companies from
investments in the form of shares or long 111 term finance in any enterprises setup
to develop, maintain and operate an infrastructure facility. Subscription to equity
shares or debentures issued by a public company formed and registered in India
and the issue is wholly and exclusively for the purpose of developing, maintaining
and operating an infrastructure facility, will be eligible for deductions under
Section 88 of the income Tax Act, 1961, which permits deduction equal to 20 per
cent of the amount subscribed, from the amount of tax payable by the subscriber.

Problems and Prospects of Road Development in India:

Road transportation in India faces a number of problems. Keeping in view the

vastness of the dimensions of the country, her physiographic, her unlimited natural
resources and the fast growing passenger and freight traffic, the inadequacy of the
road network is quite glaring. Indias road length of 75.01 km per 100 sq km of
area is desperately low as compared to 294.6 km in Japan, 131.2 km in Austria,
451.8 km in Belgium, 147.2 km in France and 172.2 km in Switzerland.
Again India has low road length of 240.1 km per one lakh population as against
893.6 in Japan 497.2 in Malaysia 1277.7 in Saudi Arabia, 1392.4 in Austria, 1556
in Hungary, 1572.4 in Sweden, 2494.5 in the USA, 3184.9 m Canada, 4635.4 in
Australia and 2705.7 in New Zealand. Lakhs of villages in remote areas are still
awaiting a road to reach them.
Another problem is that a little less than half of the roads (40%) are un-surfaced.
They can be used only in fair weather and become muddy and unfit for
transportation during the rainy season. Efforts need to be made to construct as
many surfaced roads as is practically possible.
 The national highway network will have to be improved to meet the growing
traffic of men and materials. A large section has insufficient road pavement
thickness. Other deficiencies are inadequate capacity; poor riding quality, weak
and distressed bridges/culverts, congested city sections too many railway level
crossings, lack of wayside amenities and weak road safety measures. About 20 per
cent of national highways need widening from single to double lanes and 70 per
cent of two lane roads have to be strengthened and selected corridors on national
highways need conversion into expressways.
This is clearly an enormous task and needs huge capital investment which is
beyond the capacity in the public sector. Consequently, National Highway Act was
amended in 1995 for encouraging private sector to participate in the construction,
maintenance and operation of roads on Build, Operate and Transfer () basis.
The future challenge in road sector revolves around building all-weather roads
connecting each and every village to a State Highway or a National Highway. It is
imperative to strengthen the road infrastructure for carrying rapidly increasing
volumes of agricultural products to the consuming centers in the near future. Rural
development is closely associated with road development. Another very important
factor to be considered is the rapidly growing population of motor vehicles and
increasing commerce. The number of registered vehicles increased from thousand
in 1950-51 to 58,863 thousand in 2001-02, thereby registering about 210 times
increase in a span of half a century. However, carrying capacity of our roads has
not been able to keep with the increase in vehicles. This has led to traffic jams,
delays and environmental pollution. The most disturbing factor is that population
of motor vehicles is likely to increase at an accelerated rate in the near future. As
such there is an urgent need to take steps to increase the capacity of roads.

The Ministry
The Ministry of Road Transport and Highways formulates and administers policies
for road transport, national highways, and transport research. It seeks to increase
mobility and efficiency of the road transport system in the country. The Ministry
has two wings: Roads and Transport.

The Roads wing deals with the planning, implementation and maintenance of
National Highways. It also evolves standard specifications for roads and bridges in
the country. The Transport wing deals with matters relating to road transport such
as implementation of the primary central legislation, the Motor Vehicles Act, 1988.
It also looks at the taxation and insurance of motor vehicles.

This analysis looks at the proposed expenditure of the Ministry for the year 2017-
18, its finances over the last few years, and issues with the same.

Allocations in Union Budget 2017-18 Expenditure:

The total expenditure on the Ministry of Road Transport and Highways for 2017-
18 is estimated at Rs 64,900 crore. This is 24% higher than the revised estimates
for 2016-17. In 2017-18, of the total expenditure, the highest allocation is towards
roads and bridges at 63%.

This is followed by allocation towards the National Highways Authority of India at

37%.1 In 2017-18, while revenue expenditure of the Ministry is expected at Rs.
10,723 crore, capital expenditure is expected at Rs. 54,177 crore.1 The ratio
between revenue and capital expenditure for 2017-18 is expected at 17:83. In
comparison, the ratio between revenue and capital expenditure for the years 2015-
16 and 2016-17 was at 41:59, and 22:78 respectively .

This suggests an increasing focus on capital expenditure by the Ministry in the last
few years.

Policy Proposal
In his budget speech, the Finance Minister made the following announcements
regarding the road transport sector:
2,000 km of coastal connectivity roads have been identified for construction and
development. This will facilitate better connectivity with ports and remote villages.
A specific programme for development of multi-modal logistics parks, together
with multi modal transport facilities, will be prepared and implemented.

Overview of Finances
India has one of the largest road networks in the world with about 47 lakh km of
roads This road length includes National Highways (NHs), Expressways, State
Highways (SHs), district roads, PWD roads, project roads, etc. In India, road
infrastructure is used to transport over 60% of total goods and 85% of total
passenger traffic.

Central Road Fund (CRF)

Transfers to the CRF form the biggest component of the expenditure by the
Ministry. A portion of the cess collected on motor spirit and high speed diesel is
earmarked for the development of NHs and SHs, and the amount is transferred to
the non-lapsable CRF. This amount is eventually released to National Highways
Authority of India, and to the state/UT governments for development of road
infrastructure in the country.
For 2017-18, the transfer to CRF is estimated at Rs 46,907 crore.This is a 23%
increase from the revised estimates of 2016-17 (Rs 38,209 crore). Most of these
grants are expected to be used for the creation of capital assets.

National Highways Authority of India (NHAI):

The central government is primarily responsible for the development and
maintenance of NHs, and it carries out these functions through the NHAI. The NHs
comprises about 2% of the road network but carry about 40% of the total road
traffic.

One of the primary projects implemented by the NHAI is the National Highways
Development Project (NHDP). The Ministry started the NHDP in 1998 for the
construction and improvement of the NH network to international standards.

Key projects under the NHDP include:

(i) the Golden Quadrilateral (GQ-5,846 kms of 4 lane highways),
(ii)(ii) the North-South and East-West Corridors (NSEW-7,142 kms of 4 lane
highways), and
(iii)four-laning of 12,109 kms under NHDP III.2

NHDP projects are financed primarily from the following sources:

(i) cess levied on petrol and high speed diesel (inflow from the Central Road Fund)
(ii)funds received for externally aided projects,
(iii) additional budgetary support,
(iv market borrowings, and
(v) Plough back of revenue.5 NHAI has been allocated Rs 23,892 crore in 2017-
18, of which Rs 15,429 crore (65%) will be provided from CRF, and Rs 8,462
crore (35%) will be provided from Permanent Bridge Fees Fund.

Permanent Bridge Fees Fund (PBFF)

Funds transferred to the PBFF relate to the revenue collected by the government by
way of

(i) fees levied for the use of certain permanent bridges on NHs by motor vehicles,
(ii) toll on NHs, and
(iii) Revenue share and negative grants received on some PPP projects. The fund is
utilized for development of NHs being undertaken by the government and those
entrusted to NHAI.

For 2017-18, the transfer to PBFF is estimated at Rs 8,600 crore. This is a 13%
increase from the revised estimates of 2016-17 (Rs 7,644 crore).

Issues to consider:

Allocation and utilization of funds

The Standing Committee on Transport, Tourism and Culture had been observed
that in the past few years, the actual expenditure by the Ministry has consistently
been lower than the budget estimates. Allocations for the Ministry were reduced at
the RE stage. However, the utilization of the funds by the Ministry has been high.
The Committee had recommended that the reduction of allocation at the RE stage
should be avoided, since the utilization of the Ministry is high.
Delays in projects
One of the issues with road and highway construction projects is the long time
taken for environmental, forest and wildlife clearances. These delays further add to
the cost of the projects. Table 4 shows the time taken to obtain various types of
clearances.

Delays in land acquisition are one of the key factors resulting in delays in the
implementation of road projects. With regard to land acquisition, the major
constraints faced by NHAI include

(i)inadequate manpower with the land acquisition units at field level,

(ii)time lost in arbitration, and
(iii) Erroneous or old revenue records.

The Standing Committee on Transport had recommended that a coordination

mechanism at the central level with the Ministries of Finance, Environment and
Forest and Defence will help speed up the process of clearances.

State Support Agreements signed between the central government and state
governments may ensure support from the respective state governments in
resolving any issues with implementation of projects, which are within their
purview.

In some cases, the concessionaires may get a provisional completion certificate

(PCC), on the condition that they complete a list of outstanding tasks. The
Comptroller and Auditor General of India (CAG) had observed that several
concessionaires do not complete the outstanding tasks after getting the PCC, which
leads to delays in the completion of projects.

However, in such cases, the NHAI does not penalize the concessionaires. It had
recommended that the NHAI should review the existing monitoring mechanism of
implementation of projects and consider levy of penalty on delinquent and
defaulting concessionaires.

Slow pace of road construction:

In 2014-15, the target for award of road construction projects was 8,500 km, of
which 7,980 km was awarded (94%). The road construction target for the same
year was 6,300 km, of which 4,340 km was constructed (69%).
This implies an average road construction rate of 12 km/day during 2014-15. The
CAG had observed that NHAIs achievement during 2009-10 to 2012-13 ranged
between 3.06 km/day and 17.81 km/day.

For 2016-17, the road construction target was set at 15,000 km.6 Of this, the NHAI
was to construct 8,000 km (approximately 22 km/day) and the remaining 7,000 km
was to be constructed by the National Highways and Infrastructure Development
Corporation Limited.

Private financing and contracts:

The road sector in India has seen investment from the private sector in the form on
public private partnerships (PPPs). PPP projects in this sector are implemented
through various concessionaire models. Key models include:

(i) engineering procurement construction (EPC),

(ii) build-operate-transfer (BOT) (toll),
(iii) BOT (annuity), and
(iv) Hybrid annuity. 7 In 2015- 16, about 58% of the projects under NHDP were
awarded through EPC, 33% through BOT, and the rest 9% were through hybrid
annuity.

Under EPC contracts, the private entity is expected to construct and implement a
project within a specified time, and at a specific cost, and then hand over the
project to the government on completion. In such contracts, the risks have been
assigned to the private entity, with the expectation that this will improve
innovation and efficiency.
BOT contracts are ones where the private entity is responsible for the design,
financing, construction and maintenance of an infrastructure project. Government
retains the ownership of the project. Under BOT (toll), compensation is earned
through user charges. It is the most common form of BOT concession in the road
sector in India.

Examples of such contracts are the Delhi Gurgaon expressway, the Hyderabad
metro system, etc. Under BOT (annuity), the private entity earns compensation
through annuity payments from the government. Risks for the private entity are
lower in case of BOT (annuity) projects, as compared to BOT (toll) projects.

It has been noted that the roads sector is struggling with regard to private
financing. PPP projects through the BOT (toll) mode have not been able to attract
bids.

The major highway developers in the country are also facing financial capacity
constraints. Further, the lack of debt products that are aligned with the revenue
stream profile of highway projects makes financing of such projects difficult.
These reasons have resulted in some projects getting stalled at the construction
stage, and this is also discouraging prospective bidders.

The Committee on Revisiting & Revitalizing the PPP model of Infrastructure

Development (Chair: Dr. Vijay Kelkar) had looked at issues with PPP projects in
India, in November 2015.

It had recommended setting up an independent regulator for the roads sector. It had
also noted that service delivery to citizens is the governments responsibility and
PPPs should not be used to evade such responsibilities.

The Kelkar Committee had noted that inefficient and inequitable allocation of risk
can be a major factor leading to failure of PPPs. PPP contracts should ensure
optimal risk allocation across all stakeholders. The basic principle for risk
allocation should be to ensure that the entity that is best suited to manage a risk
should be allocated that risk.

The Committee had also observed that since infrastructure projects span over 20-
30 years, a private developer may lose bargaining power because of abrupt changes
in the economic or policy environment. It recommended that the private sector
must be protected against such loss of bargaining power. This could be ensured by
amending the terms of the concession agreement to allow for renegotiations.

In January 2016, the Cabinet Committee on Economic Affairs approved the hybrid
annuity model for implementing highway projects in partnership with the private
sector. Under this model, government and the private entity will share the project
cost in the ratio of 40:60.

This model is expected to lower the initial capital outflow for the government, as
bulk of the payment will be done through annuity payments. Further, the private
entity will be insulated from traffic and inflation risks, as these will be looked after
by the government.

In May 2015, the Cabinet Committee on Economic Affairs approved 100% equity
divestment after two years of construction completion for all BOT projects. 13
Further, it also approved a one-time fund infusion to revive and physically
complete languishing BOT projects. It remains to be seen whether these policies
help in bringing more private investment into the sector and resolve the issues with
financing and slow construction.

Road safety
Within the Ministry, the Road Transport Division is responsible for framing
policies regarding road safety. The National Road Safety Policy looks at overall
road safety, and outlines various policy measures such as promoting awareness,
establishing road safety information data base, enforcement of safety laws, etc.
Between 2005 and 2015, the road network in India grew by 44%.During the same
period, the number of road accidents increased by 14%, and road accident fatalities
increased by 54%.15 In 2015, there were about five lakh road accidents in India,
which killed about 1.5 lakh people and injured about five lakh people. As a
signatory to the Brasilia Convention, the government intends to reduce traffic
fatalities by 50% by 2020.16

The NTDPC report had noted that an increase in the number of vehicles on roads,
along with the absence of a coordinated policy to control the problem had led an
increase in the number of road accidents.

In India, about 77% of the accidents are reported to have been caused due to the
drivers fault. However, the Standing Committee on Transport had observed that
majority of accidents being caused due to drivers fault may be erroneous. This
could be due to wrong reporting of such accidents.18 Other factors responsible for
road accidents include fault of drivers of other vehicles, defect in condition of
motor vehicle, fault of pedestrian, weather conditions, faulty road engineering, etc.

The NTDPC report had noted that badly designed roads should be held responsible
for road accidents instead of bad drivers. Roads in India are designed primarily for
motor vehicles exposing vulnerable road users (such as pedestrians, and non-
motorized users) to greater accident risks. It recommended that road design should
correct driver behavior towards safer alternatives.

Other countries, such as Sweden, and Australia, recognize that humans will make
errors, and instead focus on designing road transport system which minimizes the
opportunity for human error.

The Sundar Committee on Road Safety (2007) had observed that the existing
institutions in India do not have the required capacity, the adequate statutory
backing, or resources to look into road safety.20 The responsibility for road safety
is diffused across various bodies, and there is no effective coordination mechanism
between these bodies. It had recommended Road Safety and Traffic Management
Boards at the national and state levels.

These authorities would

(i)set standards and conducting audits with regard to roads,

(ii) prescribe safety features with regard to vehicles,
(iii) conduct road safety research, and
(iv) Recommend guidelines to states with regard to driver licensing and vehicle
registration.

The Motor Vehicles (Amendment) Bill, 2016 was introduced in Lok Sabha on
August 9, 2016. The Bill seeks to amend the Motor Vehicles Act, 1988 to address
various issues such as road safety, third party insurance, regulation of taxi
aggregators, recall of unsafe vehicles, and compensation for victims in case of road
accidents. The Bill increases penalties for several offences under the Act.
However, it does not provide for any road safety agencies.

In 2017-18, the Ministry has allocated Rs 250 crore (0.4% of the total budget)
towards road transport and safety. This would provide for various things such as
road safety programmes, setting up of facilities on National Highways for
extending relief to accident victims, creation of National Road Safety Board,
strengthening of public transport, research and development, and training. In
comparison, the US federal government spends about 20% of its total expenditure
on roads and highways (around $7.8 billion) towards safety.
Budget By Government
The budget announcements made by Finance Minister Arun Jaitley focused on
projects also aimed at boosting the tourism sector in the country. The government
will develop 2,000 kms of roads in coastal areas that will not only facilitate better
connectivity with ports and remote villages but will be a major attraction for the
tourists. The roads will be developed along the ocean highways in the United
States along the Indian coastline which stretches for 7500 km.

ALLOCATION FOR HIGHWAYS INCREASED BY 12 PER CENT

The key feature of the budget was enhanced allocation for highways sector by 12
per cent which will bring it to Rs 64,900 crore for 2017-18. Highways sector,
which has been one of the priority areas of the government, had a budgetary
estimate of Rs 57,976 crore for this fiscal, which was revised to Rs 52,447 crore.
"In the road sector, I have stepped up the budget allocation for highways from Rs
57,976 crore in budgetary estimate 2016-17 to Rs 64,900 crore in 2017-18," Jaitley
said while tabling the Budget.
Market Size
Foreign Direct Investment (FDI) received in Construction Development sector
(townships, housing, built up infrastructure and construction development projects)
from April 2000 to March 2017 stood at US$ 24.3 billion, according to the
Department of Industrial Policy and Promotion (DIPP).

Investments
India is witnessing significant interest from international investors in the
infrastructure space. Some key investments in the sector are listed below.

The Government of India has planned an investment worth Rs 45,000 crore

(US$ 7.07 billion) for the development of India's north-eastern regions
bordering China, Bhutan, Bangladesh and Myanmar.
The Ministry of Road Transport and Highways, Government of India,
invested Rs 14,916 crore (US$ 2.32 billion) for the Special Accelerated
Road Development Programme for North East (SARDP-NE) and Rs 4,095
crore (US$ 635.6 million) for the National Highway (Original) over the past
two years to improve the road infrastructure in India's north eastern region.
The infrastructure sector in India witnessed 33 deals in FY 2016-17
involving US$ 3.49 billion as against US$ 2.98 billion raised across 31 deals
in FY 2015-16, with the majority of deals led by the power, roads and
renewable sectors, as per investment bank Equirus Capital.
 Abertis Infraestructuras SA, a Spanish infrastructure firm, has agreed to buy
two toll road assets in operation in South India from Macquarie Group for
Rs 1,000 crore (US$ 151 million) to scale up its presence in India.
Fiscal incentives for the sector (reason of investment)
o 100% FDI through automatic route allowed subject to applicable laws
and regulation.
o Right of way (ROW) for project land made available to
concessionaires free from all encumbrances.
o NHAI/GOI to provide capital grant (Viability Gap Funding/Cash
Support) up to 40% of project cost to enhance viability on a case to
case basis.
o 100% tax exemption for 5 years and 30% relief for next 5 years,
which may be availed of in 20 years.
o Duty free import of modern high capacity construction equipment.

Government Initiatives
The Road Transport & Highways Ministry has invested around Rs 3.17 trillion
(US$ 47.7 billion), while the Shipping Ministry has invested around Rs 80,000
crores (US$ 12.0 billion) in the past two and a half years for building world class
highways and shipping infrastructure in the country. The Government of India is
expected to invest highly in the infrastructure sector, mainly highways, renewable
energy and urban transport, prior to the general elections in 2019.
A total of 6,604 km out of the 15,000 km of target set for national highways in
2016-17 has been constructed by the end of February 2017, according to the
Minister of State for Road, Transport & Highways and Government of India.

The Government of India and the Asian Development Bank (ADB) have
signed US$ 375 million in loans and grants for developing 800 kilometer
(km) Visakhapatnam-Chennai Industrial Corridor, which is the first phase of
a planned 2,500 km East Coast Economic Corridor (ECEC).

Road construction projects awarded to BOT companies recorded a CAGR of 1.23

per cent during FY06171
 Both NHAI & Ministry of Road Transport & Highways awarded projects of
around 6,397 kms in FY161
In 2015-16, 7 projects (20 per cent) of the total 4,368 kms of NHAI projects
awarded were allocated to BOT mode
During FY17, projects of about 422 kms were awarded to BOT players by NHAI,
in comparison to 873 kms in FY16

Key Investments/Developments
The Union Minister of State for Road, Transport and Shipping has stated that the
Government aims to boost corporate investment in roads and shipping sector,
along with introducing business-friendly strategies that will balance profitability
with effective project execution.
Some of the key investments and developments in the Indian roads sector are as
follows:

The National Highways and Infrastructure Development Corporation

(NHIDCL) has been awarded a contract to build five all-weather access
tunnels worth Rs 23,000 crore (US$ 3.57 billion) in Jammu and Kashmir by
2024.

Investment Opportunity
Union Minister for Road Transport and Highways & Shipping Shri Nitin Gadkari
has called upon investors in the United States to invest in India, saying it is a
golden opportunity for them, with the present government giving topmost priority
to infrastructure development . At an event hosted by the U.S.-India Business
Council (USIBC) in Washington yesterday, Shri Gadkari held discussions with
senior executives of United States and Indian companies, regarding his plans and
vision to strengthen Indias infrastructure, investment opportunities in road
construction and port-led industrialization, and how U.S. industry can collaborate
with the Government of India. The U.S.-India Business Council is the premier
business advocacy organization, comprising 400 top-tier U.S. and Indian
companies, advancing U.S.-India commercial ties. USIBC is the largest bilateral
trade association in the United States, with liaison presence in New York, Silicon
Valley, and New Delhi.
A commitment is made in improving the countrys road, highways, and port connectivity
in a time-bound, result oriented, corruption-free and transparent manner that includes
e-governance and fast-tracking decision-making. The pace of road construction has
accelerated to an all-time high of 20 kilometers per day and next year we plan to
increase it to 41 km per day. This is a golden opportunity to invest in India. The
Minister also spoke on the new highways under construction in the country, financing
mechanisms under PPP models, framing policies for logistics parks, modernization of
roads, building intelligent traffic systems for road safety and further innovation and
technology to Indias logistics sector . Shri Gadkaris team also outlined the progress that
has already been made in the roads, highways, and shipping sectors. Shri Rohit Kumar
Singh, Joint Secretary, Ministry of Road Transport and Highways, highlighted specific
investment opportunities in the highways sector while Shri Alok Srivastava, Additional
Secretary, Ministry of Shipping, shared details on the Sagarmala Program the
Ministrys flagship port-led development initiative to bring down logistics cost and boost
investment, exports, and jobs.

Market Analysis
India spends around 14.4% of its GDP on logistics and transportation as compared
to less than 8% spent by the other developing countries.

Indian freight transport market is expected to grow at a CAGR of 13.35% by 2020

driven by the growth in the manufacturing, retail, FMCG and e-commerce sectors.

Freight transport market in India is expected to be worth US$ 307.70 billion by

2020.

In India road freight constitutes around 63% of the total freight movement
consisting of 2.2 million heavy duty trucks and 0.6 million light duty trucks
covering more than 18,00,000 kms of road length carrying more than 3000MMT
(million metric ton) of load annually.

NOVONOUS estimates that the road freight movement is expected to increase at a

CAGR of 15%. This will be driven by the growth in Indian FMCG, retail and
pharmaceutical sectors, which have large freight transport requirements across the
country which is generally done by road transportation.
This report found that the rail freight constitutes around 27% of the total freight
movement in India. It consists of a large infrastructure of more than 65000 kms of
rail network carrying more than 1400MMT of load annually. With the growth in
core manufacturing sector and with the proposed Make in India campaigns it is
expected that the freight movement of core commodities like iron ore, steel, coal,
petroleum etc are projected to increase at a fast pace. NOVONOUS estimates that
Indian rail freight market will grow at a rate of around 10% CAGR over the next 5
years.