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The National Highways Authority of India (NHAI) has assured highway developers that an adequate supply of fuel, bitumen, and other essential inputs would be maintained despite the escalation in the US Israel-Iran conflict in the Middle-east even as the developers urged the government declare prevailing situation as a Force Majeure event for highway projects to help them protect against revenue shortfall and extension of concession periods. At a virtual review meeting, chaired by the NHAI chairman Santosh Kumar Yadav, on Friday, the National Highway Builders Federation (NHBF) flagged several issues including possible increase in prices of essential inputs that could impact the pace of highways development in the country.
According to sources, aware of the deliberations, the NHAI chairman assured the developers that the evolving situation is being closely monitored at the highest levels. “NHAI is in continuous coordination with IOCL, which has confirmed sufficient stock availability of fuel and bitumen, with no major supply disruptions anticipated,” he informed the developers.
Under the Model Concession Agreement (MCA) for NHAI road projects, Force Majeure events are typically classified into three categories, each with different relief measures. These include non-political events or acts of God such as floods, earthquakes, plagues, epidemics (like COVID-19), or other natural disasters, indirect political events such as industry-wide labor strikes, riots, or national lockdowns and political events. However, international wars are not covered under Force Majeure clause.
The highway developers said they anticipated 15 per cent increase in transportation cost on the back of increase in diesel price and rising input material costs are expected to significantly escalate transportation expenses. “This will further strain project execution budgets and may cause delays in logistics and site operations,” NHBF said.
The developers also said that the suspension of private commercial LPG with immediate effect may disrupt operations in several ancillary industries dependent on it and may lead to temporary suspension of manufacturing activities for an uncertain duration, thereby affecting project timelines.
The highway developers further suggested that NHAI reduce the price indexation lag from 3 months to one month to better reflect real-time market conditions and prevent under-compensation to contractors.
Besides, the developers suggested the government considers provisions aligned with internationally accepted contracting mechanisms under which war-related events are treated as Force Majeure, covering both declared and undeclared conflicts.
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