The Ministry of Road Transport and Highways (MoRTH) is contemplating an extension of the defect-liability period within engineering-procurement-construction (EPC) contracts to 10 years, aiming to reduce road maintenance costs for the government and incentivize contractors to enhance construction quality. The initiative is part of efforts to curtail road accidents by ensuring improved road durability. While the proposal is under consideration, concerns have been raised about potential risks for contractors, who could face claims beyond their control during an extended defect-liability period.
The Ministry of Road Transport and Highways (MoRTH) is exploring the possibility of extending the defect-liability period within engineering-procurement-construction (EPC) contracts from the current duration to a decade. This potential move is part of an initiative aimed at curbing road maintenance costs for the government while simultaneously incentivizing contractors to elevate the quality of construction, ultimately contributing to a reduction in road accidents. As per sources, the ministry is actively engaged in consultations with various stakeholders and anticipates finalizing comprehensive proposals in the near future.
Under the existing framework of road construction using the EPC model, the responsibility for national highway maintenance goes to the central government after the completion of the defect-liability period. During the defect-liability period, the contractor assumes responsibility for maintenance. The proposed extension of the defect-liability period to 10 years is viewed as a strategic approach to instill a long-term perspective in contractors during the construction phase, and the government anticipates that this will lead to improved road quality and durability.
The defect-liability period, often referred to as the warranty period, ensures that contractors remain accountable for addressing any defects or issues that may arise post-construction. While extending this period could potentially enhance the overall quality of road infrastructure, there are considerations regarding the associated risks for contractors. Claims arising beyond their control during an extended defect-liability period could pose challenges for contractors.
In the fiscal year 2024-25, the Ministry of Road Transport and Highways has allocated INR 2,600 crore for road maintenance. While this budget is consistent with the estimates for the preceding fiscal year, it reflects a marginal increase compared to the INR 2,573.66 crore spent on road maintenance in 2022-23. The funds for national highway maintenance by the central government are drawn from the Central Road Infrastructure Fund and are executed through various agencies, including state public works departments, the Border Roads Organisation, the National Highways Authority of India, and the National Highways & Infrastructure Development Corporation.
It's noteworthy that under the Bharatmala Pariyojana, a flagship highway development program, the government has awarded road projects totaling 25,713 km at a capital cost of INR 7,81,845 crore until December 2022. Of this, construction for 14,317 km, equivalent to 56% of the total road length, has been approved under the EPC model. As the ministry plans to undertake larger road projects in the future, the shift toward the build-operate-transfer (BOT) model is contemplated, where maintenance liabilities are retained by the contractors. For projects valued up to INR 500 crore, the EPC model is expected to remain the preferred mode of execution.
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