Highways Are Built Twice: First on Spreadsheets, Then on Ground

When we think of highways, the mind often goes to wide lanes, faster travel, and smoother drives. But for policymakers, financiers, and operators, highways are built first on spreadsheets, with numbers, projections, and models, before a single layer of asphalt is laid.

Understanding what goes into this “first build” is crucial, because it determines whether a highway project is viable, sustainable, and capable of delivering long-term benefits. Four factors in particular form the backbone of this evaluation: economic, financial, regulatory, and risk related.

Economic Analysis

| Every highway begins with a question: will it create value beyond its cost?

Economic analysis answers this by evaluating whether highways balance immediate costs with long-term socio-economic benefits. Beyond reducing travel time, highways save fuel consumption, lower vehicle operating costs, and enhance regional connectivity, thereby boosting trade, industrial growth, and tourism.

In recent years, reductions in carbon emissions have also become a quantifiable benefit. For instance, a four-lane highway that cuts 20 minutes of travel time for 20,000 vehicles daily can save over 15,000 tonnes of CO₂ annually. These savings align projects with ESG benchmarks and open access to climate-linked financing. A detailed assessment also factors in accident-related costs, healthcare expenses, and loss of productivity. This perspective justifies investment in safer designs and better infrastructure.

Analysts employ techniques such as Economic Internal Rate of Return (EIRR), Net Present Value (NPV), and Benefit-to-Cost Ratio (BCR) to determine project viability and guide resource allocation.

In addition to direct user benefits, highways generate employment, strengthen supply chains, and support sustainable regional development. These wide-ranging benefits make economic analysis a critical foundation for informed decision-making in the transport sector.

Financial Analysis

| Numbers on value are not enough; someone must still foot the bill.

Assessment of financial viability is essential to determine whether a highway project is not only feasible but also profitable and sustainable in the long run.

Highways are among the most capital-intensive infrastructure assets. Costs span construction, land acquisition, financing charges, and long-term operations and maintenance.

Financial analysis involves integrating traffic demand forecasting, toll revenue models, construction and maintenance cost estimates, and sensitivity analyses on variables such as inflation, interest rates, and growth assumptions. Together, these parameters allow decision-makers to evaluate key financial indicators like the Financial Internal Rate of Return (FIRR), Debt Service Coverage Ratio (DSCR), and payback periods.

A structured evaluation of these indicators provides clarity on revenue risks, funding gaps, and return expectations, which is critical for both PPP models and government-funded projects. For investors, this process offers insights into revenue potential, exposure to risks, and likely returns, helping them make informed funding decisions.

Most importantly, data-backed financial analysis strengthens investor and lender confidence while ensuring that resources are allocated efficiently. This makes it not just a tool for financial structuring, but also a foundation for sustainable infrastructure development.

Regulatory Factors

| Even the best plans stall without the green light of policy and regulation.

Highway projects ultimately rely on the regulatory environment for execution. Even with sound economics and financing, progress depends on transparent bidding, timely approvals, and clear concession frameworks that build investor confidence.

In India, frameworks from MoRTH, NHAI, and state PWDs have reshaped the sector over the past decade, encouraging private participation through PPP models. These include:

• DBFOT: private developers design, build, finance, operate, then transfer back.
• HAM: combines government support with private funding, lowering toll-revenue risk.
• Traditional PPPs (BOT): driven by toll revenues and risk-sharing through concession agreements.

Recent reforms such as model concession agreements, digitized land records, streamlined land acquisition, and faster environmental approvals have improved delivery and accountability.

Yet, challenges remain. Delays or inconsistent enforcement can derail timelines and inflate costs. Ultimately, strong regulation and transparent governance form the enabling layer that allows highways to move from plan to pavement.

Risk Scenarios

| No spreadsheet is complete without acknowledging the unknowns.

Highway projects face a wide range of risks: traffic volume shortfalls, construction delays, cost overruns, unforeseen regulatory changes, and environmental challenges. Each of these can directly affect project feasibility, financial returns, and timely completion.

Another critical dimension is accident-related risk. The loss of human life and the toll of injuries can never be reduced to numbers. Yet, in addition to the personal and social tragedy, accidents create significant economic burdens, ranging from healthcare expenses and loss of productivity to property damage and insurance claims. To address both dimensions, accident cost analysis is used as a tool. By quantifying these impacts, it helps justify investments in safer road designs, more effective traffic management systems, and robust contingency planning, measures that ultimately save lives while reducing economic losses.

Integrating risk assessment and accident cost analysis into project planning allows governments, investors, and operators to make more informed decisions, allocate resources efficiently, and develop effective mitigation strategies. Addressing risks proactively ensures highways are not only profitable and efficient, but also safe, resilient, and sustainable over the long term.

This write – up has outlined the four pillars that determine whether highways succeed on paper before they succeed on the ground: economic, financial, regulatory, and risk related. In the next parts, we’ll take up each factor in turn and explore how it shapes the highways we all travel on. Stay tuned!