The Ministry of Road Transport and Highways is limiting arbitrator fees to reduce the National Highways Authority of India's (NHAI) legal costs. This regulatory change aims to settle pending construction claims worth ₹1.17 trillion as part of a wider goal to make the NHAI debt-free by 2030.
The Ministry of Road Transport and Highways has issued a directive to enforce strict limits on arbitrator fees for government-led highway projects. This move is designed to control spiraling legal costs and address a mountain of pending claims against the National Highways Authority of India (NHAI). According to the latest available data, NHAI faces construction-related arbitration claims totaling approximately ₹1.17 trillion, a figure highlighted in its FY24 annual report.
Regulation and Fee Structure
Under the new mandate, regional officers are required to strictly follow the Fourth Schedule of the Arbitration and Conciliation Act, 1996, when fixing fees for arbitral tribunals. This schedule sets a clear, model fee structure based on the value of the dispute. For instance, claims under ₹5 lakh incur a fee of ₹45,000, while disputes exceeding ₹20 crore are capped at a maximum fee of ₹30 lakh. The ministry observed that in many ad-hoc cases, there was a lack of uniformity in how fees were calculated and paid, which often led to increased financial pressure.
NHAI Debt Reduction Goal
The initiative is a major component of the NHAI's roadmap to become debt-free by 2030. The authority has been actively reducing its financial burden since its debt peaked at roughly ₹3.5 trillion in FY22. As of January 2026, the NHAI's total debt stood at ₹2.16 trillion, with plans to bring this down to ₹1.5 trillion in the upcoming fiscal year. To achieve this, the government has been shifting away from market borrowings toward direct budgetary support.
Impact on Developers and Dispute Resolution
Road developers often face delays and cost overruns due to land acquisition challenges and changes in project scope, leading to the large volume of pending claims. To expedite the resolution process, the government is introducing a tiered payment system. Under this new structure, 80% of the arbitrator fees will be paid during the proceedings, with the remaining 20% released only after the final award is issued. This change aims to encourage faster case completion.
While the government is pushing for these reforms, legal experts note that the effectiveness of the fee cap may vary. Parties involved in a dispute can still mutually agree on arbitrator fees, which could potentially bypass the Fourth Schedule, as seen in past legal precedents such as the 2022 ONGC v Afcons Gunanusa JV case. Additionally, arbitrators retain the right to decline cases if they find the government-prescribed fee structure unacceptable.
Moving forward, the ministry is encouraging the use of established arbitration institutions, such as the India International Arbitration Centre (IIAC), to standardize the process. Investors and stakeholders should track whether these measures successfully accelerate the settlement of pending claims and whether the NHAI can maintain its pace of deleveraging in the coming years.