Whalesbook
The Ministry of Road Transport and Highways (MoRTH) has significantly updated its construction timeline rules for national highways. The changes aim to make project delivery more realistic and reduce ongoing disputes. New guidelines, effective for projects tendered from May 6, 2026, allow up to six years for road construction completion. This replaces a previous 30-month cap for projects over 50 km or involving major bridges over 200 meters. MoRTH stated that older methods did not adequately consider factors like earthwork volume, difficult terrain, and structural complexities in today's infrastructure projects. These past unrealistic schedules often resulted in higher costs, increased risks, more arbitration cases, and reduced stakeholder confidence.
Under the new circular, projects with civil costs over ₹1500 crore receive a base construction period of 30 months. Additional time can be granted based on project complexity. Projects with multiple flyovers, tunnels, or elevated structures get an extra six months. Another 12 months can be added for challenges related to difficult terrain, such as formation cutting and slope stabilization. Long bridges up to 10 km have a 72-month maximum. Tunnel projects also get more time: six months are added for each kilometer beyond the initial 2 km. Specific allowances are made for the Western Ghats (24 months for the first 2 km) and the Himalayas (36 months for the first 2 km).
This policy change comes as India pursues an aggressive infrastructure development agenda, dedicating substantial capital expenditure to the sector. For fiscal year 2026-27, the Road Transport and Highways sector is allocated ₹2.94 lakh crore. Over the last ten years, MoRTH's capital spending has grown nearly sixfold, reaching ₹3.01 lakh crore in 2023-24. The National Highways Authority of India (NHAI) reported capital expenditure of ₹2.44 lakh crore in FY26, surpassing its target and building 5,313 km of highways. Despite this strong activity and high daily construction rates, execution challenges and project delays have been frequently reported.
A uniform two-year execution period for projects, regardless of their complexity, has historically contributed to delays. While the new guidelines recognize complexity, they may not fully resolve underlying issues like land acquisition problems, regulatory approvals, and funding shortfalls that have often affected projects. Data from sectors like real estate shows large projects averaging 4.2 to 5.7 years to complete over the past decade. This suggests complex projects naturally need more time. However, the ministry's extension appears to acknowledge existing systemic challenges rather than speeding up project delivery.
The extension of highway construction timelines to a maximum of six years, while intended to reduce disputes and improve predictability, also raises concerns. This longer duration could indicate that current execution capabilities are not meeting India's ambitious infrastructure targets. It may also suggest that core issues such as land acquisition, regulatory approvals, and complex financing structures remain unresolved, leading to extended project timelines instead of efficient completion.
For construction companies, longer project durations mean capital is tied up for longer, potentially straining cash flow and increasing exposure to inflation. While the new timelines may reduce immediate arbitration risks by acknowledging complexities, they do not control cost increases. India's infrastructure projects have a history of significant cost overruns, with 458 projects exceeding their budgets by a total of ₹5.71 lakh crore as of May 2024. Additionally, 55% of Hybrid Annuity Model (HAM) projects analyzed were delayed by more than six months as of September 2024. The new policy could therefore simply formalize existing delays rather than fix underlying inefficiencies. The Ministry itself has overseen projects with substantial delays and cost overruns, highlighting the need for solutions beyond revised timelines.
Despite potential challenges, the Indian government remains dedicated to its infrastructure development goals, seeing it as vital for economic growth. The updated timelines are expected to bring more predictability to project completion, significantly reduce disputes, and improve the quality of national highway assets. By allowing for more realistic and feasible bids, the ministry anticipates better project outcomes and a stronger boost to investor confidence. With interest rates potentially declining in 2026, the financial environment for these large projects could become more supportive of continued high public capital spending in infrastructure.