Diesel price surge: Highway developers to get compensation from centre

The Ministry of Road Transport and Highways (MoRTH) has introduced a fuel cost compensation mechanism for National Highway projects, providing relief to contractors grappling with higher diesel prices amid disruptions linked to the ongoing West Asia crisis.

The move allows contractors and concessionaires to claim compensation for increases in the cost of petroleum, oil and lubricants (POL), particularly bulk diesel used in construction and maintenance activities. The ministry said the measure is aimed at mitigating the impact of elevated fuel costs and ensuring uninterrupted execution of highway projects across the country.

Under the revised framework, fuel-related price adjustments in EPC projects will be linked to the official bulk price of high-speed diesel (HSD) at the nearest Indian Oil Corporation (IOC) refinery. Compensation will be calculated based on the difference between diesel prices prevailing on the base date and the average bulk diesel price during the relevant billing period.

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The benefit has also been extended to Performance-Based Maintenance Contracts (PBMC), where fuel indices will now be aligned with official bulk diesel prices.

For Hybrid Annuity Model (HAM) projects, Short-Term Maintenance Contracts (STMC), item-rate contracts and projects that do not have a price-escalation clause, the ministry has assumed a POL component of 10% of the value of work for calculating compensation arising from higher fuel costs.

The framework additionally covers build-operate-transfer (BOT) projects that are currently under construction. Concessionaires will be able to opt for the fuel and bitumen cost adjustment mechanism instead of seeking relief under force majeure provisions.

Contractors seeking compensation will be required to submit original invoices for bulk diesel purchases from the nearest public sector refinery undertaking.

The relief will apply to work carried out between May 1 and June 30, 2026, and could be extended if global conditions continue to exert pressure on fuel prices.

The decision comes as infrastructure developers face rising input costs due to geopolitical tensions in West Asia, which have pushed up energy prices globally. Industry observers believe the measure will help protect contractor margins, reduce the risk of project delays and support the timely execution of highway construction works.