The contract, on around 1.3km (0.8 mile) of the A487 at Glandyfi near Machynlleth is expected to be completed in late 2012 - with major rock cuttings involved to widen the road that is so narrow in parts oncoming vehicles can only just pass.
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Transport Minister Ieuan Wyn Jones said the investment by the Welsh Assembly Government would improve traffic flow.
"The main aim of this improvement is to allow vehicles to pass freely and reduce delays on this section of road," he said.
"The accident rate, a result of the narrow width on this section of road, is higher than the national rate for this category of road, so the improvements are necessary to enhance safety."
(BMcC/GK)
