Bharatmala Pariyojana Faces Cost Surge, Soars More Than Double The Initial Estimate
The Bharatmala Pariyojana (BMP) programme, India's ambitious highway infrastructure initiative, has witnessed a significant increase in its project cost, soaring to Rs 10.64 lakh crore, more than doubling its initial estimate. This surge is attributed to a sharp rise in input costs and escalating land acquisition expenses, as reported by the rating agency ICRA.
Originally envisioned with an investment of Rs 5.35 lakh crore, the Bharatmala Pariyojana aims to develop 34,800 kilometres of national highway corridors. However, the revised cost has impacted project awarding activities, leading to a 48 percent Year-on-Year decline in the first seven months of FY2024. During this period, only 2,595 km were awarded compared to 5,007 km in the corresponding period of FY2023, pending cabinet approval for the revised cost of Bharatmala Phase-I.
ICRA forecasts a contraction of over 30 percent Year-on-Year in project awarding activity for the entire fiscal year of 2024. Ashish Modani, ICRA VP & Co-Group Head, emphasised that nearly 95 percent of road awards by the Ministry of Roads and Transport and Highways (MoRTH) over the last five years utilised the hybrid annuity mode (HAM) and engineering, procurement, and construction (EPC) route, placing the entire funding burden on the ministry.
Modani highlighted a shift in focus toward BOT (Toll) projects due to lower burden on MoRTH, as opposed to the substantial cost escalation in Bharatmala Pariyojana and the increased funding requirements. ICRA pointed out that the average number of bidders for EPC and HAM projects was 15 and 8, respectively, while for BOT (Toll) projects, it remained below 5. The evolving dynamics in funding and project execution pose challenges to the execution of India's largest highway infrastructure initiative.
