Decline in traffic across IRB Infrastructure’s state highway projects

There has been a decline in traffic by 2-3% for IRB Infrastructure’s three state highway road projects in Q3, 2013, compared to the corresponding period last year. This has considerably slackened the traffic growth of the company for the quarter.

Factors contributing to decline in traffic:

Various factors have contributed to the decline in traffic. Smaller projects were affected by internal issues like monsoons and parallel roads. Besides, some of the adjoining corridors were not properly developed thereby affecting traffic along them. Due to the mining ban imposed in Karnataka, traffic was affected due to the lack of cargo movement especially in Chitradurga district. Moreover, traffic was affected in the Pune-Nashik area due to the automobiles industry slowdown.

Traffic flow on national highways a saving grace for IRB:

Compared to the decline in traffic along its state highway projects, the national highway projects of the company have seen considerably higher traffic flow in the same period. Traffic along the Mumbai-Pune highway grew by about 5.5-6%, and has remained stable throughout the last quarter. Explaining this state of affairs, the managing director of the company stated that this statistic was quite normal considering that national highways account for about 40% of the total traffic.

Phenomenon quite normal:

Further emphasising the point, he stated that traffic along state highways would be considerably lesser than along national highways. This is because they act as a feeder to national highways, flowing from state highways to national highways. As a result, the impact of a slowdown in traffic along state highways would be higher compared to national highways.

Direct correlation between economic growth and traffic flow:

It has been observed that traffic along highways have not grown as expected. Most of the highway projects under construction were those that were bid and won in 2007-08. It was expected that the Gross Domestic Product (GDP) would grow at the rate of 8% annually. However due to the prevailing economic situation, the current projections have been drastically reduced to 5.5%. This has had a direct impact considering that the traffic flow along highways has a direct correlation to the economic growth.