The Hindu Business Line : National Highway builders take a hit on rising input costs

New Delhi, May 6 Builders of National Highways claim to have taken a hit of about Rs 10,000-12,000 crore during the last two years, on account of “extraordinary” escalation in input costs for which they are not adequately compensated. These 40-odd projects involve an investment of Rs 42,000 crore.

“Cement, steel, bitumen and petrol/lubricants account for about 35 per cent of the cost of construction. Price of these commodities has seen an unprecedented hike in last two years,” Mr M. Murali, Director-General, National Highways Builders Federation (NHBF), said.

The NHBF represents 52 companies, which includes Larsen & Toubro, Unitech, GMR, GVK and Nagarjuna Construction, with exposure in highway projects. NHBF officials met the Prime Minister on the issue here today.

However, the contract (model concession agreement) for build, operate, transfer (BOT-toll) projects followed by National Highways does not provide for any escalation in input costs. And, for BOT-annuity projects, where companies are paid for construction and toll revenues accrue to the Government, the cost escalation that developers are compensated for is drawn from the increase in Wholesale Priced Index (WPI) of the respective raw materials.

Since the increase in WPI is well below the actual market price increases of these raw materials, road developers are incurring losses on actual funds incurred in the projects, the NHBF said.

For BOT (annuity) projects, they now want payment of additional costs based on based on revised indices that reflect actual change in price. For BOT (toll) projects, they are demanding an extension in the time period for which they can collect toll. Otherwise, they indicate it would be difficult for them to access funds and continue work.

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