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NHAI Clarifies WPI Indexation Methodology for Price Adjustment
The National Highways Authority of India (NHAI), vide Policy Circular bearing Reference No. 9.3.21/2026 dated June 19, 2026 (the “Circular”), has issued an important clarification regarding the values of the Base Index (Ao) and Current Index (A₁) to be adopted for the calculation of Price Adjustment under Clause 19.10 of the Standard Engineering, Procurement and Construction (EPC) Agreement. The clarification applies to EPC projects executed after April 2017 and seeks to address inconsistencies observed in the application of Wholesale Price Index (WPI) data for the plant, machinery and spares components.
The Circular assumes significance in the context of Clause 19.10 of the Standard EPC Agreement, which links price adjustment for the Plant, Machinery and Spares component to specified Wholesale Price Index (WPI) values. The circular notes that ambiguity arose in the computation of price adjustment claims due to the use of different WPI commodity groups and base-year series for determining the base index (Ao) and current index (A₁). While “Manufacture of Machinery for Mining, Quarrying and Construction” forms part of the 2011-12 WPI series, “Construction Machinery” belonged to the erstwhile 2004-05 series, which was discontinued upon adoption of the revised WPI framework in April 2017. Consequently, the use of indices drawn from different commodity classifications and WPI series resulted in ambiguity and inconsistency in the computation of price adjustment claims under EPC contracts.
To eliminate ambiguity and standardise computation methodology across EPC projects, Circular has clarified that, for the purpose of calculating price adjustment on the Plant, Machinery and Spares component (PA), both
- The Base Index (Ao); and
- The Current Index (A₁), shall be taken from the same WPI series, namely the 2011-12 base year series, for the commodity group “Manufacture of Machinery for Mining, Quarrying and Construction”.
The circular further clarifies that this methodology shall apply with effect from April 2017.
