NEW DELHI: India’s highway construction and road construction sector is set to slow in 2026-27, as ongoing conflict in West Asia disrupts supplies of key inputs and drives up costs, according to industry experts.
The pace of national highway construction has already fallen to 23.74 km per day in 2025-26 (till the third week of March), down from 29.21 km per day in 2024-2025 and 33.83 km per day in 2023-2024, according to rating agency CareEdge. The report, released on Monday, expects implementation to slow further to 21-22 kilometers per day this fiscal year.
The slowdown is due to a shortage of bitumen, a major petroleum product used in road paving, with contractors reporting a severe mismatch between demand and supply.
A spokesman for the National Highway Builders Federation (NHBF) said contractors are receiving barely a quarter of what they need. “If they need 10 trucks, they can get just two,” he said, adding that the crisis intensified during the peak pre-monsoon construction season. The spokesman added that maintenance contracts are the most affected, with bitumen prices rising by 20-30% amid disruption to supply chains.
According to industry experts, the supply shock exacerbates existing structural constraints.
Domestic bitumen production remained stagnant at around 5 million tonnes even as consumption rose to 8.74 million tonnes, resulting in a persistent deficit, Moglix CEO Rahul Garg said. He pointed out that refineries give priority to fuels with a higher profit margin, such as gasoline, diesel, and jet fuel, over bitumen.
“Between 2010 and 2018, refining capacity rose by 21%, but bitumen imports rose by 823%, with Gulf supplies filling the gap. This model is now under pressure. Asphalt prices, which reached approx. $40,000 per ton before the conflict, now approaching $65,000,” Garg said, adding that overall input costs — including fuel, steel and electricity — had risen by 15-25%.
“The overall impact on the economics of highway projects is estimated at up to 8%, with medium-sized contractors under fixed-price state contracts absorbing most of it,” he added.
Supply chain disruptions and rising logistics and material costs will impact implementation in the near term, said Zafar Khan, executive director at Vertis Infrastructure Trust. “Availability may remain uncertain if the geopolitical situation persists,” he said.
Cost pressures are also expected to impact profitability. CareEdge estimates that road developers’ Ebitda (EBITDA) margins could fall by 100-150 basis points in FY27 due to the rise in bitumen prices.
The Ministry of Road Transport and Highways has not yet set its annual target. An official familiar with the matter said that this would happen within a month. “By then, we will have a clearer picture of the war and better understand its impact,” the official added.
Meanwhile, the Health Ministry on Wednesday introduced an emergency cost escalation compensation mechanism following industry protests. An official familiar with the information said the move allows contractors to receive monthly payments, easing liquidity pressures. The price adjustment cycle was also shortened from three months to one month to better reflect volatile input costs such as fuel, bitumen and steel.
