Massive Arbitration Burden on NHAI
As of March 2025, NHAI faces arbitration claims worth nearly ₹1 trillion, accounting for about 40% of its total liabilities. These prolonged disputes have strained the authority’s financial health and slowed new project awards. Highway construction targets have fallen from 6,300 km in FY22 to around 4,000 km in FY25.
According to government officials, the new policy aims to bring time-bound resolution to these disputes. It will involve tighter scrutiny of requests for arbitration extensions, accountability mechanisms for delays, and stronger financial monitoring of claim settlements.
Background: Rising Project Delays and Costs
India’s highway sector has been facing increasing legal and financial pressures as contractors and concessionaires contest cost overruns, payment delays, and contractual disagreements. Arbitration, while meant to provide faster resolution than courts, has often dragged on for years, adding legal costs and interest payments that burden public finances.
Data presented in Parliament in July 2024 revealed that nearly 60% of arbitration awards in public sector undertakings (PSUs), including NHAI and NTPC, were challenged — extending the dispute timeline further and delaying payouts.
Government’s Corrective Measures
The Ministry of Road Transport and Highways, in coordination with the finance ministry, is formulating new arbitration norms. These will limit the number of permissible extensions, set deadlines for arbitrators to issue awards, and impose penalties for non-compliance. The government also plans to expand the use of conciliation and mediation mechanisms as alternatives to traditional arbitration.
In addition, digital tracking tools will be introduced to monitor the progress of arbitration cases, ensuring greater transparency and accountability in dispute management.
Impact on Infrastructure Development
Officials believe that clearing pending arbitration cases will free up funds and restore investor confidence in public-private partnerships (PPP) for highway development. Reduced dispute durations will also help the government accelerate its target of constructing 12,000 km of highways annually under the Bharatmala Pariyojana initiative.
By streamlining arbitration and dispute resolution, the government hopes to prevent the sector from being bogged down by litigation, ensuring that public money is utilized efficiently for infrastructure growth.
Industry Reactions
Industry analysts have welcomed the move, noting that arbitration delays have been one of the biggest challenges facing contractors and investors in India’s infrastructure sector. “Fast-track resolution of disputes will restore trust and improve liquidity for developers,” said a senior infrastructure consultant.
Experts also suggest that these measures should be complemented with capacity building for NHAI’s internal dispute resolution teams and reforms in contract structuring to minimize ambiguities that lead to arbitration.
As India pushes for rapid infrastructure expansion, reducing legal bottlenecks has become essential to maintaining momentum in one of the economy’s most crucial sectors.
