Crude price rise hits road building costs

NEW DELHI: Ever wondered whether the movement of crude oil prices on the world’s top bourses have a bearing on the roads you drive on? While rising crude prices may be burning a hole in your pocket through higher petrol and diesel costs, they are also affecting the cost of construction of roads, made primarily of bitumen, a refined product of crude. Cost of construction of roads, linked to various inputs including the cost of bitumen, has increased 20% over the last year.

From Rs 5 crore per km last year, the present cost of construction is Rs 6-6.5 crore per km. Bitumen prices, constituting about 25% of the total cost of construction, have increased 16% over the last year. “Over the last two years, the landed cost of bitumen has gone up from an average of Rs 14,000 per tonne to about Rs 25,000 per tonne. A variation of about Rs 11,000 per tonne results in a price increase of nearly Rs 20 lakh per km in construction cost,” Soma Enterprise director Ankineedu Maganti said.

“A single km of a national highway consumes six tonnes of bitumen. In 2004, the price of refined bitumen was as low as Rs 13,000 per tonne, whereas today it stands at over Rs 21,000,” DS Constructions spokesperson Rafi Khan said. “However, the 40% increase in bitumen prices does not result in an equivalent increase in cost of construction since bitumen consumption is only 5.5% of the total volume of the material used,” he added.

According to Gammon India assistant vice-president Umesh Gupta, the total production capacity of bitumen by the public sector refineries is not enough to meet the demand. “The increasing activity in the road sector, consisting of both new construction and maintenance of existing roads, is outpacing the availability of bitumen,” he said.

However, according to oil industry sources, even though demand for bitumen is growing at a faster rate than its supply, domestic availability is not an issue. “In fact, a year ago, there was a surplus of bitumen and it was exported to Bangladesh and some other countries,” a source said.

“Overall, the increase in cost of road construction by over 20% in the last one year can be attributed to general inflation and its cascading impact. There has been an increase in fuel prices, transportation costs, labour costs and cement prices,” Mr Gupta said.