West Asia war still disruptive, how Nitin Gadkari brought road builders relief
Gadkari's ministry provided short-term relief to contractors stressed by the cost spike in bitumen, the import-reliant material critical for highway expansion
The relief extends to Short-Term Maintenance Contracts (STMC) and item rate agreements as well as engineering procurement and construction (EPC) contracts with a term of under 18 months.
Applicable for the period April 1 to June 30, this is the second round of relief announced within a fortnight. On April 1, the ministry had notified protections for EPC and hybrid annuity model projects. The relief has now been extended to all contractors with lesser contractual mechanisms.
Bitumen is a petroleum-sourced adhesive used to bind road surfaces during their construction. With shipping hampered due to the West Asia war and prices of imported materials rising, the intervention is seen as vital for India’s ambitious highway programme.
The new formula pays contractors monthly as per their actual bitumen usage, up to a maximum (the approved job mix) in order to prevent fraud. The circular was signed on April 17 by Harleen Kaur, director (highways) in the Union ministry.
This relief mechanism is meant to tackle an age-old structural problem faced by road contractors that has become more acute due the geopolitical turmoil. Almost 40 per cent of India’s bitumen needs are met through imports. Around 95 per cent of the imported bitumen comes from the Gulf. The war meant control on bitumen costs and security of supply became basic concerns for the highway construction industry back home.
India used around 8.74 million tonnes of bitumen in FY25 as against 8.43 million tonnes the previous year. As on March 28, the price of bulk bitumen imported from Iraq was $360 per tonne and $310 from Iran. Domestic bitumen (Mumbai) was selling at around $405.
Domestic bitumen being more expensive, the cost differential has increased import dependence from 30 per cent at the start of 2021 to 40 per cent now. P.C. Grover, director general of the National Highways Builders’ Federation, said the cost of bitumen imported from Iran—once a key source—has gone up by about Rs 2,000 per tonne following tightened sanctions. “Bitumen is important, more so for contracts for maintenance of highways,” said Grover.
For road contractors, the West Asia conflict, starting February 28, couldn’t have been more ill-timed. In India, builders generally cover maximum asphalt (a composite material made of aggregates and bitumen) from February to June. A delay in supply of imported bitumen, however brief, threatens to temporarily halt pavement works at dozens of projects.
Work to lay down 10,000 km of highways is peaking ahead of the oncoming monsoon season. The National Highways Authority of India has already held emergency meetings with domestic refiners.
Highway developers want the West Asia conflict to be declared ‘an act of God’, a legal status that protects contractors from liability in case of project delivery delays. That argument was made last week by the National Highways Builders’ Federation to Nitin Gadkari, the Union minister for road transport and highways. He reportedly assured the federation that relief would be considered. And within days, the ministry moved.
While the April 1 move brought some relief to the bigger contractors already under contract with escalation clauses, the April 17 circular from the ministry covers smaller contractors who were previously left uncovered with similar protections. The quick turnaround implies Gadkari’s push got converted into on-ground policy.
However, the squeeze extends beyond bitumen. Construction material haulers have raised their rates, too, impacting project economics. The knock-on effect is that contractors will have to deal with higher cost pressures across the board.
Relief through bitumen produced locally is not anticipated in the near term. Domestic supply is already tightening, with Indian refiners setting up residue upgradation units that can take in bitumen and deliver it as more useful other products, such as diesel.
Over the past decade, road construction has been a strategic component of India’s growth agendas. The Centre’s Bharatmala initiative targets completion of over 60,000 km of highways and expressways by 2030. So, any break in critical projects can cascade its way through timelines and costs.
With the relief limited to June 30, the ministry implies that it expects bitumen prices to stabilise over the next three months, which seems reasonable if the pressure on global crude prices stabilises and geopolitical tensions ease.
This system also imposes some procedural discipline: in the case of contractors, they must provide invoices as evidence of actual prices being appropriate and remove chance claims. But whether three months is enough will be contingent upon the state of oil markets and the West Asia conflict itself. Contractors might ask for extension of relief if bitumen prices remain high or rise further.
The supply-chain hit from the war continues to be severe. “The cascade didn’t stop at energy and agri inputs. Packaging films, plastics, synthetic textiles and pharmaceutical intermediates are all starved of feedstock. For India’s growth-stage consumer brands, this isn’t a logistics disruption. It’s a stress test,” said Antim Suman, co-founder and COO of Edgistify, an AI-driven supply chain solutions partner for industry.
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The relief extends to Short-Term Maintenance Contracts (STMC) and item rate agreements as well as engineering procurement and construction (EPC) contracts with a term of under 18 months.
Applicable for the period April 1 to June 30, this is the second round of relief announced within a fortnight. On April 1, the ministry had notified protections for EPC and hybrid annuity model projects. The relief has now been extended to all contractors with lesser contractual mechanisms.
Bitumen is a petroleum-sourced adhesive used to bind road surfaces during their construction. With shipping hampered due to the West Asia war and prices of imported materials rising, the intervention is seen as vital for India’s ambitious highway programme.
The new formula pays contractors monthly as per their actual bitumen usage, up to a maximum (the approved job mix) in order to prevent fraud. The circular was signed on April 17 by Harleen Kaur, director (highways) in the Union ministry.
This relief mechanism is meant to tackle an age-old structural problem faced by road contractors that has become more acute due the geopolitical turmoil. Almost 40 per cent of India’s bitumen needs are met through imports. Around 95 per cent of the imported bitumen comes from the Gulf. The war meant control on bitumen costs and security of supply became basic concerns for the highway construction industry back home.
India used around 8.74 million tonnes of bitumen in FY25 as against 8.43 million tonnes the previous year. As on March 28, the price of bulk bitumen imported from Iraq was $360 per tonne and $310 from Iran. Domestic bitumen (Mumbai) was selling at around $405.
Domestic bitumen being more expensive, the cost differential has increased import dependence from 30 per cent at the start of 2021 to 40 per cent now. P.C. Grover, director general of the National Highways Builders’ Federation, said the cost of bitumen imported from Iran—once a key source—has gone up by about Rs 2,000 per tonne following tightened sanctions. “Bitumen is important, more so for contracts for maintenance of highways,” said Grover.
For road contractors, the West Asia conflict, starting February 28, couldn’t have been more ill-timed. In India, builders generally cover maximum asphalt (a composite material made of aggregates and bitumen) from February to June. A delay in supply of imported bitumen, however brief, threatens to temporarily halt pavement works at dozens of projects.
Work to lay down 10,000 km of highways is peaking ahead of the oncoming monsoon season. The National Highways Authority of India has already held emergency meetings with domestic refiners.
Highway developers want the West Asia conflict to be declared ‘an act of God’, a legal status that protects contractors from liability in case of project delivery delays. That argument was made last week by the National Highways Builders’ Federation to Nitin Gadkari, the Union minister for road transport and highways. He reportedly assured the federation that relief would be considered. And within days, the ministry moved.
While the April 1 move brought some relief to the bigger contractors already under contract with escalation clauses, the April 17 circular from the ministry covers smaller contractors who were previously left uncovered with similar protections. The quick turnaround implies Gadkari’s push got converted into on-ground policy.
However, the squeeze extends beyond bitumen. Construction material haulers have raised their rates, too, impacting project economics. The knock-on effect is that contractors will have to deal with higher cost pressures across the board.
Relief through bitumen produced locally is not anticipated in the near term. Domestic supply is already tightening, with Indian refiners setting up residue upgradation units that can take in bitumen and deliver it as more useful other products, such as diesel.
Over the past decade, road construction has been a strategic component of India’s growth agendas. The Centre’s Bharatmala initiative targets completion of over 60,000 km of highways and expressways by 2030. So, any break in critical projects can cascade its way through timelines and costs.
With the relief limited to June 30, the ministry implies that it expects bitumen prices to stabilise over the next three months, which seems reasonable if the pressure on global crude prices stabilises and geopolitical tensions ease.
This system also imposes some procedural discipline: in the case of contractors, they must provide invoices as evidence of actual prices being appropriate and remove chance claims. But whether three months is enough will be contingent upon the state of oil markets and the West Asia conflict itself. Contractors might ask for extension of relief if bitumen prices remain high or rise further.
The supply-chain hit from the war continues to be severe. “The cascade didn’t stop at energy and agri inputs. Packaging films, plastics, synthetic textiles and pharmaceutical intermediates are all starved of feedstock. For India’s growth-stage consumer brands, this isn’t a logistics disruption. It’s a stress test,” said Antim Suman, co-founder and COO of Edgistify, an AI-driven supply chain solutions partner for industry.
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