In an effort to improve substandard roads, India’s government is to end a 14-year policy of reliance on private investment into the country’s road network.
Come March of next year the government will award US$2.3bn of state-funded highway contracts. This will mark a major policy shift for the country that has relied on construction companies to fund roads with loans that are then repaid from income such as tolls.
According to a Bloomberg report, the move comes in light of a credit crunch that has left construction companies struggling to source bank loans.
“There is no way we can achieve the target for road building unless the government figures out some way of funding it,” said Manish Saigal, a partner for transport and logistics at KPMG in Mumbai. “Liquidity has been a serious problem.”
Since 1 April just 600km-lanes of projects have been awarded, compared with a full-year target of 8,800km.
The state of the country’s major highways is so bad that it takes trucks on average 65 hours to make the 1,374km journey from Mumbai to Delhi, the report stated.
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