Road projects face further delays on rising input cost
Rising crude, bitumen and steel prices may again delay awarding of road projects under the National Highway Development Programme (NHDP).
By Gunjan Pradhan Sinha, ET Bureau |
NEW DELHI: Rising crude, bitumen and steel prices may again delay awarding of road projects under the National Highway Development Programme (NHDP). With cost of road projects up by 7-8% in the last four months (March-June 2008), developers may not find new projects viable. This could add to the instances of missed targets for completing various NHDP stretches.
Cost of road projects has risen by 12-15% in the past one year (June 2007-June 2008). The fund crunch is likely to cause further delays, say developers. What is more worrisome is new projects may not take off as expected by the government since projects on the drawing board are ceasing to be viable at current rates.
���In March, the cost of bitumen stood at Rs 29,790 per metric tonne approximately as against Rs 34,800 per metric tonne in June 2008. There has been a 16.8% rise in 60-70 grade bitumen on account of crude price rise. Bitumen accounts for 8-10% of our costs and another 10% of total costs is contributed by diesel. The two have contributed to a 5% cost escalation in four months,��� Nagarjuna Construction Company senior vice-president (roads) Kanchan Roy said. This is compounded by a 6% rise in steel prices between February and June 2008, he added.
Projects at the concept stage may fail to take off, if rising input costs make them non-viable, believes Feedback Ventures senior vice-president (marketing) Harsh Shrivastava. ���If the developer tries to charge a higher toll on new projects, new routes may not see the expected traffic and the project may not break even within the target time,��� he said. ���The rise in cost will not only be a severe setback to NHDP but will also lead to loss of employment for both skilled and unskilled labour if the government does not take adequate steps to control inflation,��� National Highways Builders Federation president Brahm Dutt said. It is advisable for developers to finish under-construction projects on time as delays will only add to their already rising input bills, an industry analyst said.
Cost of road projects has risen by 12-15% in the past one year (June 2007-June 2008). The fund crunch is likely to cause further delays, say developers. What is more worrisome is new projects may not take off as expected by the government since projects on the drawing board are ceasing to be viable at current rates.
���In March, the cost of bitumen stood at Rs 29,790 per metric tonne approximately as against Rs 34,800 per metric tonne in June 2008. There has been a 16.8% rise in 60-70 grade bitumen on account of crude price rise. Bitumen accounts for 8-10% of our costs and another 10% of total costs is contributed by diesel. The two have contributed to a 5% cost escalation in four months,��� Nagarjuna Construction Company senior vice-president (roads) Kanchan Roy said. This is compounded by a 6% rise in steel prices between February and June 2008, he added.
Projects at the concept stage may fail to take off, if rising input costs make them non-viable, believes Feedback Ventures senior vice-president (marketing) Harsh Shrivastava. ���If the developer tries to charge a higher toll on new projects, new routes may not see the expected traffic and the project may not break even within the target time,��� he said. ���The rise in cost will not only be a severe setback to NHDP but will also lead to loss of employment for both skilled and unskilled labour if the government does not take adequate steps to control inflation,��� National Highways Builders Federation president Brahm Dutt said. It is advisable for developers to finish under-construction projects on time as delays will only add to their already rising input bills, an industry analyst said.
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