NHAI Updates WPI Conversion Method for Toll Projects

The National Highways Authority of India (NHAI), through Policy Circular No. 18.109/2025 dated September 13, 2025 (the “New Circular”), has revised the linking factor used for converting Wholesale Price Index (WPI) data between different base years.

The WPI serves as a key economic indicator for inflation and cost escalation in infrastructure projects, including highway development. Over time, the Government of India periodically revises the base year of the WPI to reflect updated economic conditions and a more representative basket of goods.

• Earlier, the WPI base year was 2004–05.
• It was subsequently updated to 2011–12 to better align with prevailing market dynamics.

When such a base year change occurs, it is necessary to introduce a linking factor to ensure continuity in applying the index to ongoing projects and contracts

To address the initial shift in the WPI base year, NHAI issued Policy Circular No. 18.30 dated March 20, 2018 (“2018 Circular”). Under Para 6.3 of this circular, a linking factor of 1.641 for ‘all commodities’ was prescribed.

This factor was applied for converting WPI data from the 2011–12 base year back to the 2004–05 base year.

Subsequent review by NHAI’s Finance Division revealed that the factor of 1.641 did not fully align with official data issued by the Office of the Economic Adviser (OEA). The correct notified linking factor for ‘all commodities’ is 1.561. The discrepancy had direct implications for fixing user fee rates in publicly funded and Build Operate and Transfer [BOT (Toll)] projects, where accurate indexation is critical to balancing revenue interests of concessionaires with fairness to road users.

To address this issue, the matter was presented before the 679th Meeting of NHAI’s Executive Committee (EC) held on August 29, 2025. After detailed deliberations, the EC approved:

• Adoption of the revised linking factor of 1.561 for ‘all commodities’.
• Replacement of the earlier factor of 1.641 wherever it was applied.
• Immediate implementation of the corrected factor across all new and ongoing projects.

From the date of issuance of the New Circular, the revised linking factor of 1.561 shall be used for all WPI conversions between the 2011–12 and 2004–05 base years.

It will be applied in the fixation and adjustment of toll rates, particularly for:

• Publicly funded projects, and
• BOT (Toll) concession projects.

All financial models, calculations, and escalation-related computations will now be aligned with this corrected methodology.

Through adoption of the revised linking factor, NHAI has ensured procedural accuracy in the toll rate fixation, strengthened transparency for concessionaires and investors and supported fair adjustments for road users. This addresses a long-standing discrepancy in WPI conversions and holds important implications for toll policy, concession agreements, and the financial balance of highway projects.