The ministry of road transport and highways (MoRTH) may extend a special relief mechanism for highway contractors beyond September as conflict-related disruptions in West Asia push up bitumen prices and pressure project economics, two people aware of the matter said.
The relief, introduced in the wake of the conflict and initially available until June, was extended to September. The ministry may now extend it further, potentially until December or the end of the financial year, after reviewing market conditions and bitumen prices next month, one of the people said.
Under the relief mechanism, contractors can claim compensation for higher bitumen costs based on actual consumption and prevailing prices. The base rate is the price at the nearest refinery on the project base date, while the revised rate is the average price at the nearest public-sector refinery during the relevant month, with the adjustment released along with monthly payments.
The relief covers engineering, procurement and construction (EPC), hybrid annuity model (HAM), item-rate and certain maintenance contracts lacking adequate price-escalation provisions, for projects bid before 31 March 2026 and being executed in the current fiscal year.
Highway developers have sought an extension, arguing that higher bitumen costs and dependence on imports could make some projects financially unviable without government support. The costs are also putting pressure on contractors’ cash flows, the people said.
Queries mailed to the ministry of road transport and highways remained unanswered until press time.
Contractors say the relief remains incomplete. Devendra Jain, managing director and chief executive officer of Dilip Buildcon Ltd, said the measures announced so far were welcome but “partial in nature”, as contractors were also facing sharp increases in fuel and other inputs because of the Iran-US crisis.
“For the relief to be meaningful, it needs to be broadened beyond bitumen alone,” Jain said.
The bitumen price surge is adding to project costs. The price of Bulk VG-40, a commonly used bitumen grade, at Mathura refinery rose from ₹48,892 per tonne on 1 February to ₹82,122 by 16 April, according to industry data. Prices have since eased to around ₹75,000.
Bitumen typically accounts for 5-10% of the total cost of a standard highway project, depending on pavement design and prices, said Shailesh Agarwal, partner, risk consulting (infrastructure), EY India. “While this may appear modest, even a sharp increase in bitumen prices can add tens of crores to project costs because of the enormous quantities consumed in pavement works,” Agarwal said,
For the pavement layers cited by MoRTH, every ₹10,000-per-tonne increase can add approximately ₹15.9 lakh per project-km, although the actual impact varies depending on road design, bitumen consumption and contract terms.
Import dependence
The price pressure comes against India’s dependence on imported bitumen. Petroleum ministry data shows domestic consumption increased from 5.94 million tonnes in fiscal year 2016 (FY16) to 8.58 million tonnes in FY25, while imports rose from 880,000 tonnes to 2.9 million tonnes. Imports accounted for 33.8% of consumption in FY25, compared with 14.8% a decade earlier.
In April-January FY26, India consumed 6.88 million tonnes and produced 4.17 million tonnes, with imports of 2.32 million tonnes, accounting for 33.8% of consumption.
More than 99% of India’s bitumen imports are sourced from Iraq, the United Arab Emirates, Iran, Oman and Bahrain, exposing road construction to potential supply disruptions around the Strait of Hormuz.
“There is no significant announced increase in domestic bitumen production capacity in the near term, while demand is expected to remain supported by ongoing highway and infrastructure development projects,” said Bhavik Vora, partner and transport & logistics industry leader at Grant Thornton Bharat.
Given the volatility and import dependence, extending the relief is justified, he said, while cautioning that it should remain linked to exceptional market conditions rather than becoming permanent.
“A further extension of the relief measures would be necessary given the continued uncertainty around bitumen supplies and prices,” said Sanjay Kumar Sinha, founder and managing director of Chaitanya Projects Consultancy.
The mechanism would help cushion contractors against cash-flow pressure and prevent disruptions to road construction and maintenance, he added.
The long term
Jain said expanding domestic capacity would take time. “There’s a difference between ‘can’ and ‘will happen quickly’,” he said, pointing to the economics of refining, where bitumen generally sits lower in the value chain than petrol and diesel. The shortfall, therefore, is a structural issue linked to refiners’ product mix and would require a multi-year response rather than an immediate policy intervention.
Deloitte India partner Deepa Seshadri said relief should continue only while abnormal prices or shortages persist and should be linked to actual bitumen consumption. “Timely price adjustments are important to keep highway projects moving,” she said, while recommending higher domestic production, greater storage, diversified imports and increased road-material recycling.
Sinha said India consumes around 8.8 million tonnes annually and suggested refinery upgrades, diversified sourcing and alternatives such as bio-bitumen could strengthen domestic supply. CSIR-CRRI and CSIR-IIP have developed indigenous bio-bitumen technology that can replace up to 30% of conventional bitumen, he said.
Jain said the cost impact also needs to be viewed holistically, since fuel and other raw materials contribute significantly to project costs. “It’s important to look at this holistically rather than fixate on bitumen alone.”