NHAI’s policy shift reshapes risk, financing, and dispute resolution in road projects.

Is Arbitration Losing Ground in India’s Highway Dispute Framework?

India’s highway sector is at a turning point after the National Highways Authority of India (NHAI) decided to exclude arbitration for disputes exceeding ₹10 crore, signalling a decisive shift in dispute resolution. The move follows a June 2024 advisory by the Ministry of Finance discouraging public sector undertakings from routinely using arbitration clauses—a policy already adopted by PSUs such as ONGC. Under the new regime, Dispute Resolution Boards and Conciliation Committees will become the final and most influential forums, reducing arbitration to a non-option in high-value claims. While the government aims to curb inconsistent awards, prolonged proceedings, and mounting fiscal liabilities, the shift raises concerns for developers and lenders. Higher dispute friction may lead to conservative bidding, tighter lending terms, and increased costs. More critically, disputes may increasingly move to Indian courts, risking longer timelines due to judicial backlogs. Critics argue that strengthening institutional arbitration—rather than eliminating it—would better balance efficiency, predictability, and investor confidence. The success of this policy experiment will shape the credibility of India’s road infrastructure ecosystem for years to come.