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The Ministry of Road Transport and Highways (MoRTH) is expected to see a 5% decline in road construction in FY2026, with execution projected at 9,500-10,000 km, down from 10,000-10,500 km in FY2025, according to ICRA. The slowdown stems from reduced project awards over the past two years, with only 3,100 km awarded in 9M FY25, much lower than 5,835 km in 9M FY23. Toll collections are forecast to grow 7-9% in FY26, driven by a 3.5-5% traffic increase and moderate toll rate hikes. Despite these challenges, expressway projects and monetization efforts may offer long-term sector resilience.
The Ministry of Road Transport and Highways (MoRTH) is projected to see a decline in road construction projects over the next fiscal year. According to ICRA, the execution of road projects is expected to drop by about 5% in FY2026, with estimates ranging between 9,500 to 10,000 kilometers. This reduction follows an estimated construction of 10,000 to 10,500 kilometers in FY2025. The slowdown can be traced back to a decrease in project awards over the past two years, particularly in FY2024 and FY2025. Advertisement
In the first nine months of FY2025, project awards were limited to approximately 3,100 kilometers, showing little change compared to the same period last year but significantly lower than the 5,835 kilometers awarded in 9M FY2023. ICRA forecasts that road awards for FY2025 will remain similar to FY2024, falling between 8,500 and 9,000 kilometers. However, there has been a slight uptick in project awards since November 2024, which, if it continues, could lead to a growth of 9-11% in FY2026.
Vinay Kumar G, the Sector Head of Corporate Ratings at ICRA, highlighted that road construction is set to decline from 12,349 kilometers in FY2024 to around 10,000-10,500 kilometers in FY2025. This downturn is attributed to a shrinking order book for road developers, the impact of the Model Code of Conduct, and extended monsoon seasons affecting construction timelines in the first half of FY2025. Despite these challenges, there is a growing emphasis on constructing expressways and high-speed corridors, which may help improve lane-kilometer expansion.
The decline in road execution is evident, with a reported 5.8% drop in kilometers completed in the first nine months of FY2025 compared to the previous year. The National Highways Authority of India (NHAI) has generated about Rs 83 billion through two toll-operate-transfer (TOT) bundles in the first ten months of FY2025. Although this figure is expected to fall short of the National Monetisation Pipeline (NMP) target of Rs 534 billion for FY2025, it is anticipated to surpass the previous fiscal year's monetisation of Rs 316 billion, following the completion of additional asset transfers and pending bids.
Looking ahead, the growth in traffic is expected to slow, with projections indicating a deceleration to 2-3.5% in FY2025. This slowdown is likely to impact toll collection growth, which is anticipated to be around 5-7%. While toll rates have remained stable in FY2025, a moderate increase of 3.5-4.2% is expected in FY2026, alongside a traffic growth of 3-5%. This combination could lead to toll collection growth of approximately 7-9% in the coming fiscal year.
In summary, the road construction sector faces significant challenges due to reduced project awards and external factors impacting execution. However, the focus on expressways and high-speed corridors may provide a glimmer of hope for future growth, as stakeholders adapt to the evolving landscape of road development in India.
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