Nepal’s government decided on Monday, October 5, 2026, to implement special price adjustments for public construction contracts. This move addresses abnormal price increases in key construction materials caused by international conflicts and supply chain disruptions.The Ministry of Physical Infrastructure and Transport announced that the decision was made under Section 55(1a) of the Public Procurement Act, 2007, which allows for special adjustments under extraordinary circumstances. Sunil Lamsal, the Minister of Physical Infrastructure and Transport, confirmed the decision.The special price adjustment will apply to petroleum products, bitumen, HDPE pipes, cement, and steel. These materials have seen significant price hikes due to ongoing international conflicts, particularly tensions in the Middle East and the Hormuz region, which have disrupted global supply chains. The adjustment will cover public construction contracts that remained under implementation with a valid performance period even after March 29, 2026 (Chaitra 15, 2082 BS).Contracts executed annually and those without a price-adjustment provision will also be covered if they meet prescribed criteria. For contracts that already have a price-adjustment provision, the amount payable under the existing arrangement will be deducted, and only the remaining eligible amount will be provided. Payments will be determined based on actual and verified consumption to prevent double benefits or unnecessary payments, according to the ministry.
Long-standing Demands and Budgetary Commitment
Construction entrepreneurs, represented by the Nepal Federation of Construction Entrepreneurs (NFCE), the umbrella organization for construction businesses, had long demanded such price adjustments. They had previously declared a ‘construction holiday’ to press their demands.The government had also announced this provision in the current fiscal year’s budget for 2083/84. Finance Minister Dr. Swarnim Wagle presented the budget to the federal parliament on May 29, 2026 (Jestha 15, 2083 BS), which included this measure.
Addressing Imbalances and Ensuring Continuity
The Ministry of Physical Infrastructure and Transport stated that the decision aims to prevent construction works from being halted, ensure the continuity of ongoing development projects, and address imbalances in the construction sector fairly. This provision is intended to address price increases caused by extraordinary circumstances rather than normal market fluctuations.
Future Reforms and Unanswered Questions
Nicholas Pandey, President of the Nepal Federation of Construction Entrepreneurs, expressed hope that the government would soon introduce a working procedure through a second amendment to the Public Procurement Act to facilitate the import of construction materials.However, several details remain unclear. The exact method for calculating abnormal price increases and determining eligible amounts for adjustment has not yet been specified. Information regarding the total financial cost or estimated expenditure for the government due to this adjustment is also unavailable. The precise number of contracts expected to benefit from this decision has not been publicly disclosed, nor have the detailed criteria for contracts without existing price adjustment provisions. Furthermore, additional information on the “second amendment” to the Public Procurement Act and its current status is still needed.
