MoRTH’s road execution is set to moderate to 9,000-9,500 km in FY2026-27 as project awards decline, according to ICRA.
Credit rating agency ICRA expects road execution by the Ministry of Road Transport and Highways (MoRTH) to moderate to 9,500-10,000 km in FY2025-26 and further to 9,000-9,500 km in FY2026-27 owing to a decline in project awarding over the past three years. Road awards are projected at 7,250-7,750 km for FY2025-26, largely in line with 7,538 km awarded in FY2024-25, but lower than FY2020-21 and FY2022–23 levels.
Road awards for the first eight months of FY2025-26 stood at 1,951 km, 24 per cent lower than the 2,558 km awarded during the same period in FY2024-25. Higher awarding is expected in Q4 FY2025-26, with several projects currently in the bidding stage. Road execution under MoRTH declined by 3 per cent year-on-year to 4,612 km in the first eight months of FY2025-26 from 4,761 km in FY2024-25 due to a reduced project pipeline.
Suprio Banerjee, Co-group Head, Corporate Ratings, ICRA, said, “Owing to the shrinking order book of road developers amid continued slowdown in project awarding and disruptions caused by the early onset and elongated monsoon across the country, road construction under the MoRTH is expected to decline to 9,500-10,000 km in FY2025-26 from 10,660 km in FY2024-25. However, given the increasing focus on building expressways and high-speed corridors, the road construction growth in terms of lane-km expansion will be relatively better. With road awarding expected to remain range-bound in FY2026-27 as well, the revenue growth of road developers is likely to remain subdued over the next 12-15 months as it takes 6-9 months from project awarding to on-ground execution.”
ICRA expects competition to remain high as developers bid aggressively to rebuild their shrinking order books.
Bidding War Looms
Despite the reinstatement of earnest money deposits and additional performance security requirements, bidding intensity remains high in National Highways Authority of India (NHAI) and MoRTH engineering, procurement and construction (EPC) projects. About 71 per cent of EPC projects were awarded at more than 20 per cent discount over the base price in the last three years due to limited project awarding and a high number of bidders. A similar trend is now visible in hybrid annuity model (HAM) projects, with bidding discounts at -16 per cent in FY2024-25 and -21 per cent in the first ten months of FY2025-26.
Toll collections remain healthy in FY2025-26, with expected growth of 7-9 per cent. Amid soft Wholesale Price Index (WPI) inflation, toll rates are likely to increase by around 3.3 per cent for newer projects linked to December WPI and 2.5-3.0 per cent for older projects linked to March WPI in FY2026-27.
Banerjee added, “The toll collection in FY2026-27 is expected to be impacted by a muted rate hike, though traffic growth is likely to benefit from buoyant economic growth, resulting in an overall toll collection growth of 6-8 per cent. An ICRA study indicates that the annual FASTag pass had a limited impact on toll collections. The initial issues are also getting resolved, with most developers receiving payouts from the authority every week.”