The highway builders and contractors in their meeting with the National Highways Authority of India (NHAI) have flagged challenges that they may face on the cost front due to conflict in West Asia and have sought steps for timely compensation.
Escalating Input Costs
The meeting was called by Chairman of NHAI Santosh Yadav who assured that they are in continuous coordination with Indian Oil Corporation which has confirmed sufficient stock availability of fuel and bitumen, with no major supply disruptions anticipated.
He also assured that adequate supplies of fuel, bitumen, and other essential inputs would be maintained and the evolving situation is being monitored at the highest levels.
The National Highways Builders Federation (NBHF) that represented the industry said prices of bitumen – that comprises 15% of the construction cost – have been raised by Rs 2000 per tonne mid cycle. The prices are adjusted on the 15th of every month. A tonne of bitumen normally costs Rs 38,000 to Rs 60,000 per tonne depending on the grade. To compensate contractors for price escalation, the review of the costs should be monthly and not every 3 months.
For Highways building contractors procure diesel under bulk consumer category. Though retail prices of diesel may not be raised, the oil companies have indicated a probable price hike of Rs 20-30 per litre. Diesel is 10% of the cost of highways and the contractors fear that they may get no compensation as the contract price indexation is linked to retai diesel prices.
The cotractors have also raised apprehension over likely rise in prices of cement by Rs 25-30 per bag. This increase could due to increase the cost of fuel and other raw material like limestone procured from West Asia. Cement is again 15% of the cost of highway construction and could put pressure on the finances of contractors. Other pressure point could come from steel prices as energy costs soar.
For these inputs too the NHBF has sought more frequent price adjustments- monthly rather quarterly.
They have also sought relief for Build Operate Transfer (BoT) Toll Operate Tranfer (ToT) projects which may face traffic and toll revenue reductions due to disruptions in trade and logistics, reduced industrial and commercial activity.
NHAI Assures Monitoring
The NHAI has advised contractors were advised to immediately approach NHAI Regional Offices and field authorities in case of supply disruptions. It has also said NHAI would coordinate with local administrative authorities to ensure uninterrupted material availability.
NHAI chairman also assured that regular meetings will be held with the ccontractors to monitor developments and address industry concerns proactively.