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Budget will bet big on infra with 30% more funds

The budget allocation for the ministry of road transport and highways (MoRTH) is expected to reach a record level of 2.5 trillion next fiscal, the people said, requesting anonymity. The majority of the funds will be used to build highways, which will have a positive impact on the economy by improving the efficiency of businesses, creating construction jobs, and increasing demand for raw materials such as cement and steel.

The government’s budgetary allocation for FY24 would build on a record 52% rise in the ministry’s budget during the current year to about 2 trillion from the previous year.

Questions emailed to the spokespeople for the ministry of finance and ministry of road transport and highways on the proposed move remained unanswered till press time.

“The higher FY23 allocations are expected to be exhausted by January end or early February. So, an even higher FY24 budgetary support would be required, and this is likely to be fulfilled when budget numbers are finalized,” one of the two officials said, seeking anonymity.

An increased allocation for the next fiscal is necessary to accelerate the country’s highway development programme and expand the network of expressways, such as the Delhi-Mumbai Expressway.

A significant portion of the ministry’s capital expenditure plan for the current fiscal was allocated to the National Highways Authority of India (NHAI) at 1.34 trillion.

NHAI’s spending will include funding for the Bharatmala Pariyojana, an umbrella highway scheme aimed at optimizing the efficiency of freight and passenger movement by addressing critical infrastructural gaps.

The ratio between revenue and capital expenditure of MoRTH stood at 50:50 in 2014-15. However, this ratio changed in the following year, with the ministry increasing its spending on capital expenditure and reducing its revenue expenditure.

In FY22, the ministry spent 90% of its budget on capital expenditure, compared with 89% in the previous year and 88% in FY20.

Over the past seven years, national highways have risen by more than 50% from 91,287km (as of April 2014) to 145,000km now, despite the challenges posed by the pandemic. With the higher allocation, NHAI plans to further ramp up highway construction, aiming to reach a pace of close to 50km per day in FY24, up from 37km per day in FY21.

The higher allocation will also enable the ministry to accelerate the awarding of contracts under the Bharatmala Pariyojana Phase II.

The Bharatmala project involves the construction of a network of 83,677km of roads with a total investment of 10.63 trillion. The first phase of the project includes the construction of over 40,000km of highways.

The construction of highways has seen a significant increase in recent years, with the pace rising from 12km per day in FY15 to 37km per day in FY21. A total of 4,410km of highways were constructed in FY15, while the figure for FY21 was 13,327km and 10,457km in the following fiscal year. The target for FY23 is to construct 12,000km of highways, but so far, the pace of construction has been slower, with only 4,060km completed in the first seven months.

The pace of construction of highways increased from 12km per day in 2014-15 to 37km per day in 2020-21.

About 4,410km of highways were constructed in 2014-15, while 13,327km was constructed in 2020-21, and 10,457km in FY22. The target is to construct 12,000km in FY23, but the pace of construction in the first seven months of the current fiscal has been a mere 4,060km.

In addition to highways, logistics will be a key focus area for the government to reduce the country’s high logistics costs, which currently amount to more than 15% of GDP.

To achieve this, NHAI will establish multi-modal logistics parks at strategic locations across the country.

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