The government has rolled out a temporary cost escalation compensation mechanism for national highway projects, offering relief to contractors and concessionaires grappling with rising input costs triggered by global economic volatility.
The measures, announced for a three-month period from 1 April to 30 June 2026, aim to cushion the impact of higher fuel prices, construction material costs and logistical challenges while ensuring project execution timelines remain unaffected.
At the core of the intervention is a shift towards improving cash flows for infrastructure developers.
The government has allowed monthly payments for work completed under both Engineering, Procurement and Construction (EPC) and Hybrid Annuity Model (HAM) projects, subject to quality compliance.
This marks a departure from earlier practices that often led to delays in disbursement and working capital stress.
Escalation payouts under EPC contracts will now be released alongside monthly payments.
For HAM projects, the government has enabled the release of price escalation calculated through the Price Index Multiple on a monthly basis, further easing liquidity constraints for developers.
The move is expected to make compensation more responsive to current market conditions, particularly when commodity prices remain volatile.
The measures will be in effect until 30 June or until further review based on the global economic situation.
The latest intervention comes as the government seeks to sustain momentum in highway construction, a key pillar of India's infrastructure push, despite external headwinds impacting project costs and contractor margins. Geopolitical tensions have been driving cost increases of between five and eight per cent across national highway projects due to rising prices of bitumen, steel, cement and fuel.
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