Tensions in West Asia To Delay Road Projects

Chennai: Sustained geopolitical risks in the Gulf region threaten India’s bitumen supply chain, which could lead to cost escalation and execution delay of state and regional road projects.

India’s state-level and regional road projects are highly vulnerable to geopolitical tensions in the Gulf because of their heavy dependence on imported bitumen.

During FY21-FY26, bitumen imports have risen to 40 per cent from 30 per cent of the total demand. Almost 95 per cent of the imported bitumen is sourced from the Middle East region – primarily from the UAE, Oman, Iraq, and Iran. Any disruption in shipping lanes such as the Strait of Hormuz can quickly tighten supply for contractors on state/regional projects, finds India Ratings and Research.

State and regional road works may experience notable slowdowns as the peak geopolitical uncertainty coincides with India’s peak construction season from February to June, when bitumen demand surges. Contractors in these projects often maintain limited inventories due to cost and storage constraints, making them vulnerable to even brief import disruptions that can cause site-level material shortages, delay pavement works, and compromise the timely utilisation of state budgets.

This risk is considerably less pronounced for national highway projects, which have better access to domestic supply sources.

However, disruptions at the Strait of Hormuz and rising crude prices could elevate price levels, impacting margins in under-construction projects.

In NHAI’s HAM projects, bituminous works typically account for 8–12 per cent of project costs. A sustained 20 per cent increase in bitumen prices would lead to an overall cost impact of 1.5 per cent to 2.5 per cent.