Moderation in road capex: The roads and highways capex for the next fiscal has witnessed a sharp moderation in growth rate and is only higher by 3 per cent vis-à-vis fiscal 2024 revised estimate (RE).  According to Crisil, the overall gross budgetary outlay for the Ministry of Road Transport and Highways doubled from Rs 1.28 lakh crore in fiscal 2019 to Rs 2.64 lakh crore in fiscal 2024 (RE). 

Similar to the previous fiscal, the entire allocation of Rs 2.72 lakh crore would be via GBS as the Internal and Extra Budgetary Resources (IEBR) limit has been eliminated to reduce the National Highways Authority of India’s (NHAI) dependence on market borrowings.

Asset Monetisation

On the other hand, the asset monetisation target has increased from Rs 10,000 crore in fiscal 2024RE to Rs 15,000 crore in fiscal 2025BE. 

“To be sure, in the first nine months, of fiscal 2024, NHAI has been able to monetise ~16,000 crore, which bodes well for the divestment target set out for fiscal 2025. This assumes greater significance as roads account for close to 30 per cent of the National Monetisation Plan (NMP) targets and healthy progress in the monetisation of road assets is imperative for the achievement of overall NMP targets,” the Crisil said in its report. 

The budgetary allocation of Rs 1.68 lakh crore towards the NHAI for the next fiscal has remained flattish vis-à-vis fiscal 2024RE. 

“The elimination of IEBR and minimal contribution of cess implies that a significantly large portion of NHAI funding would be met through GBS.” the Crisil said in its post-budget report. 

Furthermore, the NHAI has been aiming to modify the build-operate-transfer (BOT) model with fast-tracked clearances to award more projects, as the share of this model has dipped to negligible levels in recent years. 

According to the report, large developers are also likely to be interested in BOT projects amidst dipping profitability in the hybrid annuity model owing to competitive bidding. Notably, if successful, the shift towards the BOT model could reduce the funding burden on the ministry since 100 per cent of the construction cost is borne by the developer in this model