NH builders seek predefined input rates for projects under active bids
Road builders are asking the government to set fixed rates for bitumen and fuel. This is for highway projects currently up for bidding. They warn that current price differences could lead to unfair bidding and delay projects. The industry believes...
By ET Bureau | Updated:
New Delhi: National highway concessionaires and contractors have urged the government to notify predefined "star rates"' for bitumen, and petroleum, oil, and lubricants for all projects currently under active bidding, saying that the mismatch in earlier estimated prices and current prices for bidding will encourage speculative pricing and put projects at risk.
There are an estimated eight national highway projects which are in the active bidding process, with cumulative project value of more than ₹42,450 crore.
It is estimated that the actual cost of executing a national highway project has gone up 30% over the cost considered while preparing the detailed project report (DPR) and obtaining project sanctions in the backdrop of a surge in crude oil prices due to the Iran war.
Cost estimated to be 30% over expenses considered while making DPRStar rate is a negotiated unit rate arrived at after factoring in escalated prices of crude-linked raw materials like bitumen and POL to ensure transparent bidding and financial viability of a project.
"These star rates should be incorporated into the bid document as the reference base rates for all projects currently under the active procurement where bids are yet to be received to ensure that all bidders price on a common, transparent and market-aligned basis, restoring fairness and comparability to the bidding process," the National Highways Builders Federation (NHBF) said in a recent submission to the road transport ministry and the National Highways Authority of India (NHAI).
The industry is apprehensive that a bidder who prices bitumen and POL realistically at current market rates will be inherently uncompetitive against one who assumes price softening or adopts optimistic input cost assumption.
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The issue, if unaddressed, could impact the pace of award of road projects this fiscal year.
The industry wants the government to realign base rates used in escalation formulas to DPR assumptions rather than bid-date rates, while reviewing bid estimates to reflect current input costs for more reliable evaluation.
