NHAI Strengthens Monitoring and Penalty Framework for ATMS Works

The National Highways Authority of India (NHAI), vide Policy Circular bearing reference no. 11.111/2026 dated September 17, 2026 (the “Circular”), has prescribed a framework for monitoring Service Level Requirements (SLR)/Service Level Agreements (SLA), payment deductions and penalties for Advanced Traffic Management System (ATMS) works across Engineering Procurement Construction (EPC), Hybrid Annuity Model (HAM) and Build-Operate-Transfer (BOT) projects. The Circular seeks to strengthen O&M monitoring and address non-functionality of critical ATMS equipment observed during field inspections and audits.

The Circular builds upon the ATMS provisions under MoRTH Policy Circular No. 214/2016 dated September 15, 2016 (the “2016 Circular”) and NHAI Policy Circular No. 11.53/2023 dated October 10, 2023 (the “2023 Circular”). It notes that the 2016 Circular prescribed SLRs without a corresponding payment deduction/penalty mechanism, while certain projects have implemented ATMS without incorporating SLA/SLR or penalty provisions in their governing Contract/Concession Agreement.

To address these gaps, the Circular prescribes the following mechanism:

1. where the 2016 Circular governs the Project, but the Contract/Concession Agreement does not provide for payment deductions or penalties, the SLA score, payment deduction and penalty shall be computed in accordance with Appendix B of the 2023 Circular, mutatis mutandis;
2. the same mechanism shall apply where ATMS has been implemented but the governing Contract/Concession Agreement contains no provision governing SLA/SLR and penalties; and
3. where the governing Agreement contains its own ATMS O&M SLA/SLR and penalty mechanism, the contractual mechanism shall continue to apply.

Where the applicable formula requires reference to an ATMS O&M payment value or other cost basis, which is not specified in the governing Agreement, the Circular prescribes a benchmark ATMS O&M rate of Rs. 23,720 per km per month for computation of the applicable deduction or penalty.

In addition to SLA-linked deductions and penalties, the Circular introduces instance-based penalties under Annexure-A for specific compliance failures identified during inspections and audits. These penalties shall apply cumulatively with, and not in substitution of, deductions or penalties otherwise payable under the Agreement or the SLA mechanism. The specified instances include, inter alia:

1. non-maintenance of critical equipment/spares;
2. non-availability of video walls, camera feeds or accident-zone recording;
3. expired software licences or inadequate video storage;
4. non-provision of mandated power sources;
5. non-functional VMS/VSDS units; and
6. unresolved defects in civil work or OFC cuts.

SLA/SLR compliance and the resulting deductions and penalties shall be computed quarterly across all project modes, irrespective of the periodicity of actual payments. The amounts shall be recovered as follows:

1. EPC: adjustment against the Contractor’s quarterly O&M payment;
2. HAM: aggregation of the deductions for the two quarters and adjustment against the corresponding half-yearly annuity payment; and
3. BOT: appropriation from the Escrow Account on a quarterly basis in accordance with the Concession Agreement.

The Circular also strengthens the consequences of continued non-compliance. Where the ATMS O&M termination clause under the relevant Agreement becomes invocable, a 30-day Cure Period Notice may be issued to the Contractor/Concessionaire. If the non-compliance is not remedied to the satisfaction of the Authority within the Cure Period, the Technical Division concerned, with the approval of the Member concerned, shall refer the matter to IHMCL within 15 days for taking over ATMS O&M at the risk and cost of the Contractor/Concessionaire, without prejudice to NHAI’s other contractual rights and remedies.

For monitoring purposes, defects identified during inspections may be recorded by the IE/AE/Site Engineer (IHMCL) through the NHAI One App. The applicable SLA/SLR metrics shall be assessed monthly and incorporated in the relevant MPR/MIR on the Data Lake, and the IT Division may develop supporting modules on NHAI One/Data Lake.