The National Highways Authority of India has reduced its project pipeline to 2,442 kilometers for the current fiscal year. This slowdown, driven by bitumen supply disruptions and rising costs from geopolitical tensions, has led to a 45% decline in construction pace. Investors may track project execution timelines and potential impacts on contractor margins.
India’s highway construction sector is facing a period of deceleration as the National Highways Authority of India (NHAI) scales back its bidding plans for the current fiscal year. The authority now intends to bid out 54 projects totaling 2,442 kilometers, valued at Rs 1.80 lakh crore. This is a significant reduction from the previous fiscal year, when 124 projects covering 6,376 kilometers, worth approximately Rs 3.45 lakh crore, were slated for award. The reduction reflects a strategic shift towards ensuring higher project readiness before initiating tenders, with a new focus on securing 80% to 90% of land acquisition prior to awarding contracts.
Construction Pace and Supply Chain Hurdles
Official data from the PAIMANA dashboard confirms that the pace of highway construction has slowed early in this fiscal year. In the first two months, only 740 kilometers were completed, representing a 45% drop compared to the same period in previous years. While contractor capability remains stable, the industry is grappling with acute supply chain issues. Geopolitical conflict in West Asia has severely disrupted the import and logistics of bitumen, a vital raw material for road surfacing. These logistical challenges have led to significant delays in site execution, as the inability to secure bitumen halts progress even when earlier stages of civil work are complete.
Impact on Margins and Execution
Beyond supply delays, the industry is managing price volatility. Reports indicate that bitumen prices at refineries like Mathura saw sharp increases between February and April. While the government has introduced measures such as adjusting Engineering, Procurement, and Construction (EPC) price formulas to better reflect Wholesale Price Index (WPI) and bitumen data, contractors remain under pressure. CareEdge Ratings has projected a decline in the daily construction rate to approximately 21-22 kilometers for the full fiscal year. To support contractors, the government has allowed for the invocation of force majeure clauses in specific instances where supply issues have caused unavoidable delays.
Investor Monitorables
Investors may observe how this shift in NHAI's bidding strategy affects the order books of major infrastructure companies over the coming quarters. The primary focus for the sector will be the ability of contractors to manage cost inflation and the effectiveness of government support mechanisms in mitigating supply risks. Future performance will likely depend on the resolution of bitumen supply chains and the speed at which the NHAI clears land acquisition for the newly planned 2,442-kilometer pipeline. Maintaining a balance between project readiness and sustained construction volume remains the central challenge for the sector.