Non-Deduction of Threshold Amount in Change-in-Law Claims

The National Highways Authority of India (NHAI) has issued Policy Circular bearing reference no. 11.69/2025 dated August 7, 2025, introducing a key modification to the treatment of Change-in-Law claims under various concession agreements. The circular removes the long-standing requirement of deducting the threshold amount from concessionaire claims, aligning contractual practice with the principle of restoring concessionaires to the same financial position as before the change.

The earlier position, laid down in Policy Circular bearing reference no. 2.5.11/2019 dated May 17, 2019, required that concessionaires in Build, Operate, Transfer [BOT (Toll/Annuity)], Design, Build, Finance, Operate, Transfer (DBFOT), and Hybrid Annuity Model (HAM) projects could notify Change-in-Law claims only if such claims exceeded a threshold parameter. Further, the threshold amount was deducted from the claim for payment by the authority, based on the rationale that concessionaires were expected to absorb cost increases up to the threshold.

This approach applied to:

• BOT (Toll) projects for 4-laning (MCA dated 24.08.2020)
• BOT (Toll) Capacity Augmentation projects (MCA dated 09.12.2020)
• HAM projects (MCA dated 10.11.2020)

For example, under BOT (Toll) projects, the threshold was the higher of ₹1 crore or 0.5% of the realizable fee, while under HAM projects, it was the higher of ₹1 crore or 2% of total annuity payments.

The Ministry of Road Transport and Highways (MoRTH), via Letter No. NH-24028/22/2020-H-Part (2) dated April 18, 2023, clarified that for GST-related Change-in-Law claims, the threshold deduction was inconsistent with the contractual principle of placing the concessionaire in the same financial position. The MoRTH letter emphasized that the entire additional burden arising from GST should be reimbursed to the concessionaire.

This guidance was circulated by NHAI through Policy Circular No. 3.3.29/2023 dated April 27, 2023.

In light of the MoRTH clarification, NHAI’s Executive Committee re-examined the matter during its 672nd meeting held on July 3, 2025 (Agenda Item No. 672.02) and 675th meeting held on July 28, 2025 (Agenda Item No. 675.22). The Committee decided that threshold deductions should no longer apply to Change-in-Law claims. Importantly, this decision has been given retrospective effect from April 18, 2023, the date of the MoRTH clarification.

Accordingly, Para 4(iv) of Policy Circular No. 2.5.11/2019 stands amended. As per the amended provision, in the case of BOT, DBFOT, and other PPP projects (whether Toll, Annuity, or HAM), concessionaires are permitted to notify Change-in-Law claims only when such claims exceed the threshold parameters prescribed in their respective concession agreements.

However, while the threshold continues to act as a trigger for raising a claim, it will no longer be deducted from the reimbursable amount. Instead, the entire additional cost is to be compensated in order to ensure that the concessionaire is restored to the same financial position as if the change had not occurred. 

This clarification ensures full reimbursement of Change-in-Law claims, protecting concessionaires from arbitrary deductions while upholding contractual balance and project viability. By reducing potential disputes and aligning with MoRTH’s guidance, NHAI reinforces fair risk allocation and fosters greater confidence in PPP frameworks, strengthening the foundation for sustainable infrastructure partnerships.