Poor truck traffic leads to miscalculations in Highway viability plans
An analysis of national highway project done by CRISIL Research indicates a drop in the traffic growth in the last couple of years. The common traffic on many national highways has been very low than estimated by the National Highways Authority of India (NHAI).
CRISIL researched on 15 national highways and found that the traffic growth is decreased to 3 to 4 percent in the financial year 2012 and 2 to 3 percent in year 2013.
Mr. Prasad Koparkar, senior director – industry and customized research, CRISIL, says that the commercial vehicles traffic which is three fourth of the total traffic increases 2 to 3 percent in the financial year 2012 and by 1 percent in the year 2013. While the public convince traffic has a growth of 15 percent. He said that their calculation is that the overall traffic growth has decreased in the current financial year 2014 and will continue to weaken around 3 to 4 percent in next 12 months. A 100bps decrease in the traffic growth over the concession period could be responsible in a 75 to 100 bps drop in the project outcome.
The traffic growth is not the only problem for the developers. In the case of 6 highways that they analyzed, the common traffic decreased by 20 to 40 percent as compared to the number NHAI accepted. The developers have organized their own study and indentified the same deviation what NHAI noticed.
Things turned out harsh because the 6 projects had been delayed and noticed the average cost overrun about 23 percent. The reason of delay of these projects is land acquisition and clearance issue.
Mr. Rahul Prithiani, director – industry research, CRISIL, says that the estimate of road developers have gone wrong. He said that their research indicates that 5 out 6 projects have an average debt service coverage ratio (DSCR) of less than one in the first 5 years of operations. This suggested that if there is no additional money invested in the project the developers will find hard to pay loans. The project outcome is 8 to 14 percent which is half of what is estimated by the NHAI.
Source: The Times of India
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