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As the stance of governance is hardening, institutions standing on weak or corroded legs, are stumbling and crumbling. After the case of corrosion of ethics in ICICI, the IL&FS too seems to have bloodied its nose by first becoming a messiah to MaytasInfra (the Satyam scam fall out) in 2009 and then several unrelated forays. But its Achilles heel has been its averseness to the principles of transparency and governance by defending itself using the clout of its investors which include HDFC, SBI, LIC, among others. Having defaulted on debt repayments, it is in the process of selling its 37,000 sq m iconic headquarters at Bandra-Kurla Complex. While the corroded assets crumble at the altar of efficiency and governance, new debutants are filling the shoes of the gorillas of the past.
As the mother of all elections is around the corner, the government is chasing a marathon distance to showcase its achievement. By and large, the infrastructure sector has gained momentum in the last two years as order book of developers are in line with street's expectation. According to a report, the entire engineering and construction order backlog increased by 12 per cent, following adjusting for the effects of the Goods and Services Tax (GST). Total order backlog, the E&C firms was Rs 8.1 trillion at the end of FY18. Of the whole order backlog, almost 62 per cent was contributed by the construction companies, followed by 24 per cent from the capital goods companies catering to the energy industry. Interestingly, the road industry has emerged as an important contributor to the entire order book in FY18.
The number of national highways awarded and executed in India rose considerably in fiscal 2016 because of the various government policies to remove bottlenecks and an increase in road cess to fund these projects. The execution numbers picked up in fiscal 2017 and are expected to improve further in fiscal 2018. HAM model was introduced in FY16, which picked up the pace by FY17 onwards. The overall awarding is expected to reach new heights in FY19. NHAI awarded 7,400 km in FY18. More than 6,000 km was awarded in the last quarter of the fiscal year. Awarding in FY19 is expected to be higher than that post FY20 on account of increased push prior to the Lok Sabha elections. Apart from NHAI, projects under various schemes are awarded by MoRTH through state PWDs or NHIDCL. In FY19, MoRTH awarded 9,700 km and executed projects of 6,700 km.
Meanwhile, the government's alacrity in making policy adjustments in order to reduce delays in project execution hascertainly revved up India's road sector. As of April 2018, 543 national highway projects were under execution, floated by NHAI and MoRTH, of which 378 projects had no scheduled completion date. Of the remaining 165 projects, 32 had reported time-overruns. The average time over-run for these projects was 32 months. In comparison, in April 2017, of 484 projects, time over-runs were reported in 104 projects, with an average time-over run of 35 months. Also, worries linked to land acquisition dwindled. In the past, especially between fiscals 2011 and 2013, several projects were stalled and even terminated as a result of issues pertaining to land acquisition. Projects were awarded without the Central Government having substantial land in possession. However, since then, NHAI has been careful to ensure that at least 80 per cent of the land is in its possession at the time of awarding, in the case of BOT and HAM projects and 90 per cent of the land in the case of EPC projects.
Between fiscals 2019 and 2023, a report published by CRISIL Research expects an investment of Rs 6.4 trillion, up 3.5 times compared with the past five years. Notably, the government's contribution will increase to about 66 per cent and, hence, NHAI's can leverage the debt to fund its tall ambition.
A new tidal wave is in the works and only those with firm foundations will manage to hold their own.