Developments in the Indian road sector: An assessment of progress, prospects, and challenges

Abstract

India has been experiencing tremendous economic growth over the past few years. To sustain this growth momentum, appropriate infrastructure is required. Infrastructure would play a very important role in helping India continue with its growth momentum. Hence, the government has laid special emphasis on infrastructure over the past few years. The Planning Commission has estimated an approximate spending of INR 20.6 trillion (USD 500 billion) during the 11th five-year plan (2007-2012). Road Transport is the crucial link for all the infrastructure segments and enables full utilization of all other modes of transportation as it provides the last mile connectivity. Hence, we have evaluated the roads sector in India as to the demand for roads and the fulfillment for demand. The demand for roads for goods transfer as well as passenger transportation has continuously grown at about 10% over the last few decades. Also, it gives a tough competition to the railways sector. Since the regulatory and resource structures are different for different types of roads – national highways, state highways, other district roads and village roads, we have evaluated the fulfillment of this demand from various types of roads. Accordingly, we have seen that there is some thrust on developing national highways (contributing 40% of the traffic but constituting only 2% of the road network); the other roads are not getting the required attention. As a result there is a huge unmet demand and also problems on account of congestion. We have assessed the progress of the initiatives taken in each of the roads segment and evaluated the gaps. Then we analyzed the institutional and policy developments undertaking in this space due to the need for private sector funds. The maintenance of roads need special attention since the focus on road development would be futile if there are no efforts on maintaining the existing network of roads. The finance mechanism of the National Highway Development Program (NHDP) was looked at to see the possible reasons for that financing structure. The PPPs in the roads sector revolves around the Concession Agreement and hence we looked at the possible pitfalls in the Concession Agreement and what NHAI is doing to address those issues. We have also used a couple of case studies, namely, the Delhi Noida Toll bridge and the RaoPithampur toll road to see what constituted the PPP in these cases and what were the risks involved. The latest policy level changes were analyzed to see the impact on the industry as a whole. Then we looked at the current challenges which the industry faces and the reasons for such under-performance due to institutional, financial and operational factors. At the end, we have recommended key steps which need to be taken to develop the road condition in India to boost the other sectors of the economy and also to increase the private participation in the sector.