Government Tightens Rules to Speed Up NHAI Road Project Arbitrations Amid ₹1 Trillion Dispute Claims

Industrial Goods/Services

28th October 2025, 7:46 AM

Government Tightens Rules to Speed Up NHAI Road Project Arbitrations Amid ₹1 Trillion Dispute Claims

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Short Description :

The union government is implementing stricter controls to prevent lengthy and costly road and highway arbitrations against the National Highways Authority of India Ltd (NHAI). With arbitration claims reaching nearly ₹1 trillion, NHAI's liabilities are under strain, and highway project awards have declined. New rules require MoRTH approval for extensions beyond two years for arbitrators and arbitration periods, aiming to improve dispute resolution efficiency and certainty. Mediation is also being encouraged for smaller disputes.

Detailed Coverage :

The Indian government is introducing new measures to expedite arbitration processes involving the National Highways Authority of India Ltd (NHAI). These changes are designed to prevent disputes from dragging on, which has led to significant cost increases and financial strain on NHAI.

NHAI has faced numerous disputes, causing a drop in highway project awards from 6,300 km in FY22 to about 4,000 km in FY25. As of March, arbitration claims against NHAI had surged to approximately ₹1 trillion, representing about 40% of its total liabilities. A substantial 60% of arbitral awards concerning public sector units like NHAI and NTPC Ltd are being challenged.

The Ministry of Road Transport and Highways (MoRTH) has directed regional officials to obtain central government approval before granting extensions to arbitrators or seeking court extensions for arbitration periods beyond the statutory two years. Proposals for court applications need to reach MoRTH headquarters at least two months in advance, with detailed justifications.

These changes aim to enhance the efficiency and predictability of dispute resolution for highway and infrastructure projects.

Impact: This news is highly relevant to the Indian stock market, particularly companies involved in infrastructure development and construction. It could lead to faster project execution, reduced financial overhang for NHAI, and improved investor confidence in the sector's contract enforcement mechanisms. Rating: 8/10

Difficult Terms: Arbitration: A process where parties in a dispute agree to have their case heard and decided by one or more neutral third parties (arbitrators) instead of going to court. Arbitrator: A neutral third party appointed to hear a dispute and make a binding decision. Public Sector Units (PSUs): Companies owned or controlled by the government. Lok Sabha: The lower house of India's Parliament. Mediation: A voluntary process where a neutral third party helps disputing parties reach a mutually acceptable agreement. EPC: Engineering, Procurement, and Construction – a common contract model for large infrastructure projects.