Government Announces Cost Escalation Relief For National Highways

08 Apr 2026 CW Team

As part of the relief, provisions for engineering, procurement and construction (EPC) projects and hybrid annuity model (HAM) projects have been relaxed to permit monthly payments to contractors and concessionaires for work executed in compliance with prescribed quality standards and specifications. Price adjustment payments under EPC contracts will be released along with monthly payments to improve cash flow. In HAM projects price escalation calculated using the Price Index Multiple (PIM) may also be released monthly.

The mechanism for price adjustment under EPC contracts has been modified to reflect prevailing market conditions by adopting a nearer reference period. The Wholesale Price Index (WPI) for key components such as construction machinery, Ordinary Portland Cement, mild steel and other commodities will now be taken for one month prior to the relevant Interim Payment Certificate (IPC) month instead of the earlier three months. For bitumen the official retail price applicable on the first day of the month one month prior to the IPC month will be used for adjustment.

The Ministry said the changes are intended to improve liquidity and cash flow for contractors and concessionaires and to maintain momentum in infrastructure development. The government presented the initiative as a proactive measure to ensure financial stability and operational continuity of National Highway projects. Implementation will be monitored and reviewed as required.

The Government of India (GoI) has announced measures to address rising fuel and material costs affecting National Highway projects. The Ministry of Road Transport and Highways (Ministry) said the measures aim to provide relief to contractors and concessionaires while ensuring uninterrupted construction and maintenance across the country. The provisions will be applicable for a period of three months from the first of April to the thirtieth of June 2026, or until further review depending on global economic conditions. The initiative is presented as a temporary liquidity support. As part of the relief, provisions for engineering, procurement and construction (EPC) projects and hybrid annuity model (HAM) projects have been relaxed to permit monthly payments to contractors and concessionaires for work executed in compliance with prescribed quality standards and specifications. Price adjustment payments under EPC contracts will be released along with monthly payments to improve cash flow. In HAM projects price escalation calculated using the Price Index Multiple (PIM) may also be released monthly. The mechanism for price adjustment under EPC contracts has been modified to reflect prevailing market conditions by adopting a nearer reference period. The Wholesale Price Index (WPI) for key components such as construction machinery, Ordinary Portland Cement, mild steel and other commodities will now be taken for one month prior to the relevant Interim Payment Certificate (IPC) month instead of the earlier three months. For bitumen the official retail price applicable on the first day of the month one month prior to the IPC month will be used for adjustment. The Ministry said the changes are intended to improve liquidity and cash flow for contractors and concessionaires and to maintain momentum in infrastructure development. The government presented the initiative as a proactive measure to ensure financial stability and operational continuity of National Highway projects. Implementation will be monitored and reviewed as required.

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