India’s highway programme is at an inflection point, shaped as much by execution stress as by a deliberate policy reset. Over the past five years, around 574 projects worth ₹3.6 trillion have breached their construction schedules, with nearly 275 projects delayed by more than a year.
Compounding the challenge, 133 road projects worth about ₹1 trillion are still awaiting their appointed date.
These numbers underscore why the Ministry of Road Transport and Highways (MoRTH) has moved decisively to tighten norms, raise accountability and recalibrate risk.
From aggressive bidding to execution discipline
The backlog of delayed projects has been traced in part to intensified competition after bidding norms were relaxed during the Covid period. The result was aggressive pricing, thin margins and, eventually, execution slippages.
MoRTH’s response has been to rebalance the system toward capability and delivery.
Eligibility thresholds for both Hybrid Annuity Model (HAM) and EPC projects have been raised. For HAM projects, the minimum available net worth requirement has increased to 20% of estimated project cost from 15%, with net worth now computed after deducting 20% of the balance value of existing PPP projects. Each consortium member must hold at least 10% net worth, up from 7.5%.
For EPC projects, the minimum net worth has doubled to 10% of project cost, while average annual turnover requirements have been raised to 20%.
Completion criteria have also been tightened.
Bidders must now demonstrate completion of work equivalent to 35% of one similar project or 25% of two similar projects, compared with the earlier 20% threshold.
For specialised, structure-heavy projects involving bridges, ROBs, flyovers or tunnels, eligibility norms have been further strengthened.
Penalising low bids, rewarding quality
A key shift has come through the Additional Performance Security (APS) framework, effective from April 30, 2025. The earlier 3% cap on APS has been removed, allowing penalties to scale sharply for abnormally low bids. Bids priced 10–20% below cost attract a rising APS, while bids 20% or more below cost face steeper escalation, including an initial surcharge on bid value. The intent is clear: discourage reckless pricing that undermines execution.
This is reinforced by a contractor rating system, with the first list due by March 31, 2026 and annual updates thereafter. Contractors will be evaluated across three cost buckets, with quality and timely completion carrying 70% weightage, and penalties of up to 30 negative points for quality lapses.
The message is unambiguous delivery now matters more than discounting.
Tighter contracts, fewer loopholes
MoRTH has also tightened Request for Proposal provisions. “Similar work” is now restricted strictly to completed highway projects. Unauthorised subcontracting or subcontracting beyond permissible limits will be treated as an undesirable practice, attracting penalties comparable to fraudulent conduct.
Third-party bid and performance securities have been disallowed.
Project readiness has become non-negotiable. From June 1, 2025, more than 90% of the right-of-way must be acquired before bids are invited. Caps have been placed on the number of projects handled by a project engineer, and scrutiny of Detailed Project Reports has been intensified following incidents linked to design lapses.
The cumulative effect of these measures favours firms with strong balance sheets and proven execution records, while making it harder for smaller or weaker contractors to compete—supporting margin stability but raising the entry bar.
Monetisation and private capital take centre stage
With central capex flattening and states facing fiscal constraints, the emphasis has shifted to private capital via BOT and Toll-Operate-Transfer (ToT) models. The monetisation environment remains active, aided by the growth of InvITs.
The National Highways Authority of India has raised its FY26 monetisation target to ₹400 billion, from ₹300 billion earlier. Roughly half is expected from private and public InvITs, including the newly launched Raajmarg Infra Investment Trust, and the rest through ToT.
Two ToT bundles awarded in FY26 have already fetched about ₹123.6 billion, with more stretches lined up. Over FY26–FY30, the ministry has set a monetisation target of ₹4 trillion, compared with about ₹1.4 trillion realised over FY21–FY25.
A February 2025 list identified 24 highway stretches spanning 1,472 km, generating toll revenue of ₹18.6 billion in FY24. Based on past ToT multiples, these assets are expected to yield significant monetisation value.
Financing realities
Financing conditions remain supportive for large, well-capitalised EPC players, particularly those with in-house or partnered InvIT platforms for asset recycling. However, lenders are demanding higher upfront equity from weaker or new players. Financial capacity has become critical, as double leveraging at holding companies increases risk amid execution delays and monetisation uncertainty. Large sponsors may navigate this environment through portfolio monetisation, but newer entrants face a tougher road.
In effect, India’s highway sector is entering a phase where scale, balance sheet strength and execution credibility will define success marking a clear shift from the era of aggressive bidding to one of disciplined delivery.