News
NHAI Revises Price Variation Mechanism for Bitumen in EPC and HAM Projects
The National Highways Authority of India (NHAI), vide Policy Circular bearing reference no. 18.117/2026 dated May 16, 2026 (the “Circular”), has adopted and operationalised the Ministry of Road Transport and Highways (MoRTH) revised framework (vide circular no. NH- 24028/03/2026-H dated April 25, 2026) governing price variation for bituminous works applicable to Engineering, Procurement and Construction (EPC), Hybrid Annuity Model (HAM) and Performance Based Maintenance Contracts (PBMC) projects. The Circular shall apply for the period from April 1, 2026, to June 30, 2026, and introduces a separate mechanism for computation of price variation attributable to bitumen consumption.
The Circular has been issued against the backdrop of a significant increase in bitumen prices witnessed during early 2026. MoRTH noted that the price of Bulk VG-40 bitumen at Mathura refinery increased substantially between February and April 2026, affecting highway construction and maintenance costs. In order to mitigate the impact of such price escalation and ensure continuity of project execution, MoRTH introduced a special compensation mechanism in addition to the existing contractual price escalation provisions.
Unlike the conventional price adjustment methodology based primarily on index-linked escalation mechanisms under EPC and HAM contracts, the revised framework separately identifies and compensates the variation attributable to bitumen consumption.
A central feature of the Circular is the introduction of a standalone formula for determining price adjustment attributable to bitumen used in bituminous works. The Circular provides that additional payment for bitumen consumption shall be computed monthly based on actual quantity consumed during the relevant period.
Under the prescribed formula:
- the quantity of bitumen consumed is required to be based on actual consumption, subject to the approved Job Mix Formula;
- the base rate shall be the rate prevailing at the nearest refinery on the project base date; and
- the revised rate shall be the average bitumen rate prevailing at the nearest Public Sector Undertaking refinery during the relevant month of execution.
The Circular further clarifies that where bitumen prices are revised more than once within a month, the average of the applicable rates during that month shall be considered for the purpose of computation.
While introducing a separate compensation mechanism for bitumen, the Circular simultaneously retains the existing escalation methodology for non-bituminous project components.
For EPC and PBMC projects, price adjustment for items other than bitumen shall continue to be governed by the formula prescribed under the respective contract agreements read with MoRTH’s earlier Circular dated April 1, 2026. However, to avoid duplication in escalation benefits, the actual cost of bitumen consumed during the relevant month is required to be excluded from the total Interim Payment Certificate (IPC) value while computing escalation for other project components.
A similar approach has been adopted for HAM projects. The Circular clarifies that while escalation for non-bituminous components shall continue to be computed in accordance with the concession agreement, the value attributable to actual bitumen consumption must be excluded from milestone or monthly payment values for the purpose of calculating general escalation.
The separate bitumen escalation amount is thereafter required to be added to the escalation calculated for other project components in order to arrive at the total price adjustment payable under the contract.
The Circular specifically applies to EPC, HAM and PBMC projects:
- having bid due dates on or before March 31, 2026; and
- containing contractual provisions for price escalation.
The revised mechanism shall remain applicable only for works executed between April 1, 2026 and June 30, 2026.
In relation to Short-Term Maintenance Contracts (STMC) and contracts not containing escalation provisions, the Circular clarifies that MoRTH’s separate Circular dated April 17, 2026, shall apply.
