NHBF seeks escalation support of 17-18% for National Highway projects to restore financial viability

The National Highways Builders Federation (NHBF) has asked the government for a standardised additional escalation support of 17-18% for all ongoing national highway projects as an interim measure to restore financial viability and ensure continuity of works.

“Considering the cumulative impact of increase in fuel prices, withdrawal of refinery discounts on bitumen, escalation in construction materials and rise in logistics cost have led to approximately 17-18% increase in overall project cost across ongoing EPC, HAM and BOT projects,” it said in its submission to road transport and highways minister Nitin Gadkari on Tuesday.

“These increases are extraordinary, unforeseen and beyond the control of contractors or concessionaires, and were not envisaged at the time of bidding, thereby disturbing the financial equilibrium of contracts,” NHBF added.


ET has seen the copy of the submission.

NHBF has suggested the additional support could be implemented through a suitable model-specific mechanism such as lump sum support, index-linked adjustment or annuity enhancement.

NHBF has also asked for a blanket extension of three-six months for milestones and completion dates without any levy of damages and penalties along with waiver of penalties or liquidation damages and protection of cash flows under the hybrid annuity model (HAM).

As per NHBF, while escalation provisions exist in current contracts, they are largely linked to WPI and standard indices and do not capture sudden geopolitical shocks, fuel volatility or withdrawal of commercial pricing structures.

NHBF argued that the present situation represents a force majeure like economic disruption, which, while not formally classified, merits policy intervention to ensure sustainability of contract and sector stability.