NHAI Faces Land Acquisition Delays for Rs 40,000 Crore Road Projects - Read Now

The National Highways Authority of India (NHAI) is grappling with significant delays in land acquisition, stalling 42 road projects worth over Rs 40,000 crore. Despite receiving Letters of Award (LoA) nearly a year ago, these projects have not progressed to the appointed date, delaying the official start of work.

Major Challenges in Land Acquisition

NHAI's land acquisition challenges stem from:

1. Right-of-Way Issues: Developers cite delays in securing at least 80% of land, which is promised within six to seven months of the LoA.
2. Forest Clearance: Bureaucratic hurdles in obtaining environmental and forest clearances.
3. Compensation Disputes: Landowners’ compensation demands often result in prolonged negotiations.

These issues are particularly prominent in greenfield highway projects, adding to the sector's woes.

Projects Facing Delays

Some of the high-value projects impacted include:

• Varanasi-Kolkata Greenfield Expressway.
• Bangalore-Vijayawada Expressway.
• Ludhiana-Bathinda Greenfield Highway.
• Warangal-Khammam Highway.

Although a few packages within the Belgaum-Hungund-Raichur Section recently received appointed dates, delays extended over 1.5 years, further compounding developer challenges.

Impact on the Road Sector

The delays are expected to have far-reaching effects on the sector:

1. Construction Slowdown: Experts predict a 10% decline in highway construction pace in FY25 compared to FY24.
2. Order Book Pressure: Developers face shrinking executable order books, with pending appointed dates reducing efficiency.
3. Financial Strain: Cost overruns, penalties, and delays in revenue generation affect profitability.

According to Setu Gajjar, Assistant Director at CareEdge Ratings, the order book position, which was previously 2.5 to 3 times the annual revenue, has now shrunk to approximately 2 times.

Shift from HAM to BOT Toll

The delays have coincided with a shift in project funding models:

• HAM (Hybrid Annuity Model):
  NHAI pays 40% of construction costs upfront, with the remaining 60% funded over the project tenure. This has created a significant financial liability for NHAI.
• BOT Toll (Build-Operate-Transfer):
  Recently reintroduced, this model requires concessionaires to bear higher equity costs, reducing the authority’s financial burden.

Experts believe this shift may help address funding challenges but could pose risks for concessionaires needing substantial upfront investments.

Execution Delays and Tendering Issues

Delays in land acquisition have been exacerbated by a slowdown in tendering and project awards under the Bharatmala initiative. Fiscal 2025 has seen limited tendering activity due to:

1. Cost Overruns: Rising expenses led to a cabinet review of projects.
2. Regulatory Delays: Approval processes for high-value projects remain sluggish.

Over the past four to five years, 50-55% of highway projects were awarded under the HAM model. However, the reintroduction of BOT Toll may mark a strategic shift in the sector's approach.

Potential Solutions

To address the challenges, the following measures are crucial:

• Streamlined Land Acquisition: Accelerating compensation settlements and clearance processes.
• Policy Reforms: Simplifying environmental and forest clearance protocols.
• Efficient Tendering: Speeding up project awards under initiatives like Bharatmala.

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