Dispute between the National Highways Authority of India (NHAI) and contractors over the payment of escalation in royalty by NHAI has led to blocking of over Rs 500 crore of contractor’s money, said an industry source.
Royalty is a fee charged to the contractor by the state government for using material like mud, limestone etc for its road project in a state.
If the royalty charged on the raw materials is increased during the contract is on, the escalation is to be paid by the NHAI.
Escalation in royalty is paid only on BOT (annuity) and EPC projects and not on BOT (toll) projects.
The authority does not pay the difference and that leads to dispute. There are cases where even after court order the money has not been paid, said an industry source.
Industry source said that amount of contractors money stuck with the NHAI was in between Rs 500 crore and 1,000 crore.
“Of all the contractors put together, it should approximately be in between Rs 500 crore and Rs 1,000 crore,” said an industry source.
But NHAI said that materials, which constitute WPI, could only be covered. Contractors’ federation contradicts this.
“If the input price of certain material, which is covered under the wholesale price index (WPI), rises the difference is paid to them. But they say that the government should cover all the risk, which is not possible,” said a senior NHAI official.
Says M Murali, director general, National Highways Builder Federation “Steel, cement, bitumen and oil are among the listed WPI item from the road sector. But the index also has an ‘others’ section, which should be considered while paying royalty.”
“As it is the WPI also has flaws. If the price of cement is increased by Rs 10, the index will reflect only Rs 2. So, the government should bet on a new system,” added Murali.
