Short Description
Highway builders are pushing back against new arbitration regulations from the Indian transport ministry, warning of financial risks to ongoing projects.
Read Time
Approximately 3 minutes
Main Article
The National Highway Builders Federation (NHBF) has voiced strong opposition to recent moves by India’s road transport ministry, which aims to curtail arbitration in disputes exceeding ₹10 crore for ongoing projects. This regulatory shift, which was connected to a finance ministry order in 2024, is seen as detrimental to the highway construction sector, potentially affecting cash flow, attracting lender concerns, and imposing additional financial burdens on banks and builders alike.
The transport ministry’s updated dispute resolution circular, released on January 12, has sparked significant concern among industry stakeholders. By mandating that disputes involving ₹10 crore or more be resolved through conciliation rather than arbitration, the NHBF argues that this change undermines established principles of fair contracting. They highlight that removing arbitration as an option for pending disputes could significantly disrupt cash flows and capacity for debt servicing. This regulatory decision risks shifting financial stress onto the banking system, creating a ripple effect across connected sectors.
In support of their argument, the NHBF has reached out to Finance Minister Nirmala Sitharaman, urging her to provide sector-specific guidance on the matter. The federation claims that the current dispute resolution framework discourages investment and raises project costs. Furthermore, they express that the lengthy concession periods and high leverage inherent in highway projects necessitate specialized dispute resolution mechanisms. The absence of arbitration could prolong project delays and exacerbate financial uncertainty for lenders, thereby destabilizing the entire highway financing landscape.
Separately, the NHBF has communicated with bankers, warning that the end of arbitration in these contracts could adversely impact both ongoing highway loan portfolios and the viability of future projects. This topic is particularly relevant in today’s financial landscape, where stability and predictability in project execution are crucial for gaining lender confidence and fostering ongoing investment.
Short Summary
The NHBF has raised alarms about the transportation ministry’s decision to halt arbitration for disputes over ₹10 crore, highlighting potential financial risks to highway projects. By contesting these new regulations, they emphasize the need for sector-specific solutions to ensure investment stability and operational viability.
