Highway cos seeks not to rise cost with WPI

New Delhi: Highway construction companies which have won projects from the National Highways Authority of India (NHAI) plan to ask the government to not peg the cost-escalation clause in their contracts with the wholesale price index (WPI) rate of raw materials.

The companies may demand that the cost rise in steel be linked with the prices published by Steel Authority of India Ltd (SAIL), says a member of the Builders' Association of India. The association may also demand that the cost of bitumen be linked with the revised prices published by Indian Oil Corporation (IOC) and of cement with market prices.

Prices of steel, cement and bitumen — which account for around 40 per cent of the input cost of a highway project —have on an average surged 60 per cent in the last one year.

The NHAI has invited construction companies to suggest suitable cost-escalation norms for all ongoing and upcoming highway projects. The move came after the companies complained they had been hit by the sharp rise in prices of steel, cement and bitumen over the past few months. The companies will submit their suggestions to the NHAI, the ministries of finance as well as road transport and highways, and the Planning Commission, by June 3.

Builders say the present cost-escalation norms, linked with the WPI, do not reflect the real rise in prices of inputs. They allege the authorities concerned have failed in updating indices related to cement, steel, bitumen and other commodities in line with the market due to incorrect input data and to suppress the rate of inflation. As a result, contractors are forced to absorb increased costs, which results in losses of around 20 per cent in specific projects, they say.