India’s Road Infrastructure as on May 2005

National highways carry nearly 40% of the total traffic, but account for only 2% of total length of roads in the country.  Nearly 35% of the national highway network is single-laned and 53% two-laned. Only 12% of the National highways have 4-lanes or more, operating in small stretches between two or more cities.

The most positive factor in the Indian Roads and Highways sector has been the change in policy from the earlier strictly toll-based BOT model (which brought in uncertainties in revenue and complicated financial closure) to include schemes involving either standard rate contracts (construction only) or annuities over the concession periods.

As a result, several projects have been launched since 1998 under rate contract or annuity models, and many have been completed or are under advanced stages toward completion. Several projects have bonus clauses for timely or early completion. As a result, private sector participation in roads and highways construction is growing. Apart from construction of new roads and highways, the private sector is also increasingly involved in operation and maintenance (O&M) of completed corridors.

Major projects:
The most important project under way is the National Highway Development Plan (NHDP), consisting of four phases:

NHDP Phase I –The Golden Quadrilateral (GQ), to connect the four major metros – Delhi, Mumbai, Chennai and Kolkata - with four-lane national highways, a stretch of 5,846 km. By November 2005, about 5,097km on the GQ had been completed.

NHDP Phase III – Port connectivity – 1,157 km

NHDP Phase III-A – four-laning of over 4,000 km of roads on BOT basis (estimated cost Rs. 220 billion)

Status of NHDP project (as on October 31, 2006)

As a matter of policy PPP will be the preferred route for implementation of the future phases of the projects.

Imports
The major imports in infrastructure sector are of heavy earth moving equipment and material handling equipment.  A sharp increase in 2004-05 indicates a surge in construction activity, necessitating imports of heavy equipment - mainly for roads, highways, bridges and flyovers.

In the airport equipment sector, the imports of navigational equipment have been steadily rising in the past few years, and the coming years should see an increase in the imports of safety and traffic control equipment as well.

Government policies:

Foreign Direct Investment
Ownership of roads and highways is strictly with government, and therefore, opportunities for foreign companies have been primarily in the form of construction contracts and consultancy services and equipment supplies, besides funding. However, there have been instances of minority foreign investment in Indian construction companies, especially from South East Asia.

Tax regime
The customs duty on import of most equipment for the sector is 36.8%.