NHAI to tighten norms for claiming damages

Will allow road developers to claim damages only within a period of 30 days

To reduce disputes, the National Highways Authority of India (NHAI) plans to tighten the norms under which builders claim compensation or damages from the government. According to the proposed change in norms, NHAI would allow road developers to claim damages arising out of an unforeseen event only within a period of 30 days.

Currently, road developers can knock the door of NHAI any time after the award of the contract, as there is no restriction on time period.

According to a senior NHAI official, the new Model Concession Agreement (MCA) proposes the time limit of a month within which the developer has to inform NHAI about the event and its impact on the company with full details. “This will reduce the number of disputes and claims from NHAI substantially. The provision will also apply to any monetary settlement or reimbursement,” the official added.

National Highways Builders Federation director-general M Murali said putting a time-frame in the contract for seeking claims would not be feasible. “It (a specific time period) won’t be workable. There has to be some accountability on either side.”

He said the Federation had that to settle disputes, NHAI should pay the amount of claims against the developer’s bank guarantee so that interest costs can be saved.

NHAI has proposed about 50 changes in the MCA. Also, a provision for revising total project cost at the time of financial closure has also been proposed along with withdrawing of any waiver of pre-conditions such as land and environmental clearances.

A proposal in this regard has already been sent to the ministry of road transport and highways for approval, which has formed a committee to look into the matter. The MCA was last revised in 2009 on the recommendations of the B K Chaturvedi committee.

NHAI recently resolved 49 pending claims for Rs 10,550 crore from 26 contractors/concessionaries for final packages worth of Rs 958 crore, according to an official statement. The NHAI Board also resolved various disputes involving three contract packages worth Rs 2,348 crore for an amount of Rs 271 crore. A numbers of disputes are still pending with NHAI.

The roads ministry is in the process of revamping MCA to make it more flexible in line with changing market conditions. Currently, the MCA norms do not give any scope for changes or additions. Earlier, in the absence of such provisions, the government had to come up with a policy for rescheduling premium as well as an exit policy for developers.

“The purpose is to make adjustments in the project costs due to delays that happen at various clearances level and steep increase in input costs. Secondly, in case of any dispute, we should be able to take the decisions at our end rather than going to the highest level authority,” said another NHAI official.

Due to the economic slowdown in the past few years, awarding of contracts for national highways has slowed down. Besides, issues related to environment and forest clearances and land acquisition have come in the way of projects.