National Road Infra Conclave 2022: Today, in the first edition of the National Road Infra Conclave (NRIC), R.K Pandey, Member Projects, NHAI and Rajeshwar Burla, Group Head, Corporate Ratings, ICRA discussed the rise in input costs, aggressive bids as well as the impact of these on execution with Surya Sarathi Ray, Assistant Editor, The Financial Express. When asked how the input cost has gone up in recent times and what are the reasons for the cost of inputs to go up, Burla said as far the input costs are concerned, the composition of various raw materials depends on the scope of the work. Typically steel, cement, bitumen, sand, fuel are some majorly used raw materials for the construction of roads.
If we simply compare December 2021 prices over March 2020, the prices of key materials like bitumen increased by almost 50-60%, steel around 30-40% and cement by 10-15%. This not only affects the projects under construction but also projects which are under maintenance, Burla said. When speaking about reasons for the increase in cost, steep increase in the crude oil, petcoke and coal cost, have pushed the bitumen’s prices in the current financial year. While, for steel, it started with rising demand in China, he added.
When asked how the rise in input cost hampering the overall scheme of things for NHAI and how the cost of construction has gone up in recent times from 2-3 years back, Pandey said the cost of construction is increasing every year. Pandey further said the NHAI is continuously evolving better and better in the specification. According to him, better specification is one of the reasons for the increase in cost. When we constructed NHDP or Golden Quadrilateral, we thought full laning was good enough but with the number of fatalities on the road, NHAI’s focus shifted to road safety. If we compare the last one decade, our cost has more than doubled. At one time, we used to say Rs 10 crore per kilometre is good cost and now, it is in the range of Rs 25-26 crore per km.
When it comes to the impact, there are two ways of looking into it, Pandey said. When you have fixed resources, the moment the cost of construction goes up, then you are left with no option but to reduce the construction. But we have flexibility in the sense that we have limited resources but we have different mode of procurement. So basically, given budget, we can slightly manoeuvre, Pandey further said. The other way how it affects, there’s a good example is keep different options available within the material, he added.