Government Eases Payment Norms for Highway Builders Amid Commodity Price Volatility
Payment norms for highway builders relaxed
The Economic TimesImage: The Economic Times
The Indian government has relaxed payment norms for highway builders to counter the impact of rising commodity prices due to the Iran war. The new rules, effective from April 1 to June 30, include monthly payments for contractors and a shortened price-adjustment cycle, aimed at stabilizing cash flows amid rising costs.
- 01Monthly payments for highway builders will now be implemented.
- 02Price-adjustment cycle shortened from three months to one month.
- 03Changes effective from April 1 to June 30, 2023.
- 04Developers expect project costs to rise by up to 10%.
- 05Government monitoring of bitumen supply to prevent project disruptions.
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The Indian Ministry of Road Transport and Highways has introduced new payment norms for highway builders to mitigate the effects of commodity price volatility caused by the ongoing Iran war. Starting from April 1 to June 30, 2023, the government will implement monthly payments for contractors and concessionaires working on engineering, procurement, and construction (EPC) and hybrid annuity model (HAM) projects. This change reduces the price-adjustment cycle from three months to just one month, allowing for quicker adjustments in response to rising costs. Developers are facing increased project costs, estimated to rise by up to 10% due to a 20-25% increase in bitumen and fuel prices, alongside a 15-18% rise in electrical component prices. The government is committed to ensuring an adequate supply of bitumen and is closely monitoring market conditions to prevent disruptions in large-scale projects.
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These changes will help stabilize cash flows for highway builders, allowing them to manage rising input costs more effectively. This could lead to smoother project execution and potentially lower delays for commuters and transport services.
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