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Seeking light at the end of the tunnel!

Seeking light
Submitted by scc india staff on October 9, 2020

Prime Minister Narendra Modi inaugurated the world’s longest railway tunnel above 10,000 feet height on October 3. The Atal Tunnel was completed at the most difficult time of coronavirus pandemic. This project is currently the best example of overcoming execution challenges and therefore a boost to the other ongoing projects in the country. In the roads and highways sector, there are expressways such as the Delhi-Mumbai and the Mumbai-Nagpur or rather the Samruddhi Expressway, which are under construction. The construction works of these projects are going on in full swing, in spite of the COVID threat.

According to reports, the roads sector is in a better position today as more projects have been announced this year and more projects sanctioned compared to the same period last year. During April to August this year, 3,181 km NH length was constructed against the target of 2,771 km for this period. Further, 3,300 km length of NH works have been awarded in this year till August, which is more than double of the 1,367 km during the same period last year. Sanctions were issued for construction of 2,983 km of NHs all over the country during this period. These are opportunities for the road contractors and road construction equipment market. However, the slowdown in the economy is posing a threat to the fund flow in the market which can affect the execution of these projects.

According to NHAI, the Authority has disbursed more than Rs 150 billion to the vendors and steps such as monthly payments to the contractors were taken to ensure cash flow to the contractors during the pandemic. While these are great steps in the right direction, there are thorny issues including incomplete information on the work site, delays in obtaining permissions, inability of contractors in accessing long term funds and even difficulties in availing loans because banks and NBFCs are still totally risk-averse with regard to funding. It is essential to address these issues for the smooth execution of projects and for better sales opportunities to road equipment players. Several opportunities are also opening up as states are inviting investments to fund their infrastructure projects. States like UP, Bihar, Uttarakhand, Odisha, Assam have already launched many projects. States are also directly seeking loans from public sector banks to facilitate these projects.