According to the agency’s memorandum on the infrastructure project, the BMP award is expected to be completed in fiscal year 2024 assuming annual NHAI awards of 6,000 to 6,500 km in fiscal year 2023. However, any significant decline in the award in fiscal year 2024, as seen in fiscal year 2019, being an election year, may push the completion of the award back to fiscal year 2025.

Assuming an annual run of 4,500-5,000 km starting in FY23, the BMP program is expected to be completed in FY2028, a six-year delay from the original planned completion date of fiscal year 2022, according to the ICRA note.

The main reasons for the delay can be attributed to the delay in land acquisition, the significant increase in the cost of land acquisition and the covid-19 pandemic. The cost of completion of BMP is estimated at Rs. 10.63 trillion after taking into account cost increases until December 2021 and is 99% higher than the initial estimates due to the substantial increase in the cost of acquisition land and the sharp increase in input costs.

The final completion cost would be even higher by at least 15 to 20 percent given the impact of rising raw material prices on construction costs, ICRA said.

“As per the implementation plan, EPC and Hybrid Annuity Mode (HAM) accounted for 98% of the total allocations under BMP to date. In terms of funding mix, BMP was initially considering 40 % of each contribution from Internal and Extra-Budgetary Resources (IEBR) and gross budget support, including toll and TOT revenue, with the balance 20% coming from private sector investment,” said Vinay Kumar G, Head of Sector , corporate ratings, Icra.” However, given the relatively higher share of EPC, the overall reliance on IEBR is rather high. Until now, the funding mix has been skewed in favor of debt. While the current level of borrowing is close to the overall level of indebtedness initially envisaged for BMP; with a significant increase in the estimated cost of completion of the BMP, the government could consider increasing the debt of the NHAI in the event of lack of other sources of financing.

The central government had increased the budgetary allocation to NHAI by 106% to Rs. 1.34 trillion while reducing its additional borrowing to nil for the financial year 2023. Allocation to the Ministry of Roads should remain at budgeted levels and thus support allocations and execution. Given the strong pipeline of operational road projects, accelerating asset monetization becomes critical to fund the balance of the cost of BMPs in addition to continued budget support.

Announced in July 2015, the BMP involves the development of 24,800 km of national highways and a residual 10,000 km of highways on hold under the former National Highway Development Program (NHDP) by financial year 2022, for an estimated expenditure of Rs. 5.35 trillion. The program is implemented by three agencies, namely the National Highways Authority of India (NHAI), the Roads Wing of the Ministry of Road Transport & Highways (MoRTH) and the National Highways & Infrastructure Development Corporation Limited (NHIDCL) with the majority of the award of the project under the BMP undertaken by NHAI.

Over the past seven years, approximately 60% (20,632 km vs. 34,800 km) of the length of the highway has been awarded as of December 2021. As of March 2022, 23% (8,134 km vs. 34,800 km) of the full length under BMP have been completed. .

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