The move aims to cut down road maintenance costs and improve the quality of construction, thereby reducing mishaps
The Ministry of Road Transport and Highways is considering extending the defect-liability period for engineering procurement construction (EPC) contracts from 5 to 10 years. The aim is to reduce road maintenance costs for the government and improve construction quality, which will decrease road accidents. A senior government official said that the ministry is consulting with stakeholders and will soon finalize the proposals.
Under the EPC mode of road construction, the contractor is responsible for maintenance during the defect-liability period, after which the central government is accountable for maintaining national highways. The ministry has allocated Rs 2,600 crore for road maintenance in 2024-25, the same as the budgetary and revised estimates for 2023-24 but slightly higher than the Rs 2,573.66 crore spent in 2022-23.
Financing for maintenance of national highways by the Centre comes from the Central Road Infrastructure Fund, and works are executed by state public works departments, the Border Roads Organisation, the National Highways Authority of India, and the National Highways & Infrastructure Development Corporation on an agency basis.
While the extension of the defect-liability period will encourage contractors to build roads with longer timeframes in mind, it also exposes them to claims beyond their control. According to Jagannarayan Padmanabhan, senior director and global head of consulting at Crisil Market Intelligence & Analytics, “Defect liability helps in ensuring that the contractors build roads keeping a longer timeframe in mind. While it’s good to have a longer period, it puts at risk contractors of claims which are beyond their control.”
Under the Bharatmala Pariyojana, the Indian government awarded road projects with a total length of 25,713 km for Rs 77,81,845 crore until December 2022. Of this, 56% or 14,317 km of the total road length was approved under the EPC mode. Meanwhile, another 42%, or 10,989 km was awarded under the hybrid annuity model, and the remaining 2%, or 408 km under build-operate-transfer (BOT) contracts.
Looking ahead, the ministry intends to use the BOT mode for larger road projects where the contractor is liable for maintenance. However, for projects up to Rs. 500 crore, the EPC mode will continue to be the preferred choice.
