Price Escalation Claims In Public Infrastructure Projects: Legal And Procedural Challenges In India
- IJLLR Journal
- Sep 22
- 2 min read
Dr Ram Kishan Rao Chilappagari, Engineer-in-Chief (R&B) (Retd.)
Ananta Koti Padmanabha Rao Vadladi, Chief Engineer (R&B) (Retd.)
Venkateshwar Reddy Gajjala, Advocate
ABSTRACT
India’s aspiration to become the world’s third-largest economy by 2028 hinges on sustained investment in infrastructure at central and State levels, yet persistent delays in execution remain a systemic concern. Air Chief Marshal Amar Preet Singh’s remark— “Not a single project that I can think of has been completed on time”—underscores the gravity of the problem. If this reflects defense procurements, civil infrastructure is unlikely to fare better.
Major public works contracts typically contain price escalation clauses covering materials such as cement, steel, and bitumen, as well as fuel and labour, allowing contractors to claim compensation for cost increases during the contract and due to employer delays. Enforcement of such clauses often triggers disputes, leading to arbitration, challenges under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, and even Special Leave Petitions before the Supreme Court, increasing costs, delays, and judicial backlog.
This study analyses the evolution of judicial approaches to price escalation in public infrastructure contracts, drawing principles from landmark rulings including Alopi Parshad, P.M. Paul, Sudhakar Das, and K.N. Sathyapalan, and, where relevant, from significant non-infrastructure cases. It also proposes amending Section 73 of the Indian Contract Act, 1872, to expressly address “price escalation” for greater contractual clarity and consistency in adjudication.
While the present focus is on escalation claims arising during both in- currency and prolongation periods attributable to the employer, contractors often pursue related claims—loss of profit, extended overheads, idling costs, and interest—which involve distinct legal and evidentiary considerations. These are addressed in an ongoing follow-up study aimed at developing assessment standards and identifying reforms to ensure fairness and predictability in dispute resolution.
Keywords: Price escalation, public infrastructure contracts, employer default, contractor claims, the Indian Contract Act, the Arbitration and Conciliation Act, construction law, and delay disputes.
