Khanal Group

Price escalation calculator

Price adjustment on a works contract for one billing period by the index formula: for each component, the value of work done × its share × the change in its index since the base. You enter the shares and indices from your contract's price variation clause.

Rules as on 22 October 2026
Usually the gross value of the RA bills for the quarter or month
Extra items, items at fixed or current rates, materials issued by the employer, as your clause says
Some formulas apply only 85% of the value (a 0.85 factor); use your clause
0 leaves it out
WPI, all commodities or as your clause names
0 leaves it out
CPI-IW, Labour Bureau
0 leaves it out
WPI, fuel item named in your clause
0 leaves it out
WPI, cement
0 leaves it out
WPI, steel item named in your clause
0 leaves it out
WPI, bitumen, or the rate your clause names

The index values filled in are illustrative figures for the worked example, not published index numbers. Enter the indices your contract names for the base month and the billing period.

The formula

For each component: V = W × P% × (Ci − Co) ÷ Co, where W is the value of work done in the period that the clause makes eligible, P% the component's share fixed in the contract, Co the base index and Ci the index for the period. Total escalation is the sum across components. Whatever share is not given to any component is the fixed portion and is not adjusted.

The indices are usually the Wholesale Price Index published by the Office of the Economic Adviser (DPIIT) for materials, fuel, cement, steel and bitumen, and the Consumer Price Index for Industrial Workers published by the Labour Bureau for labour. Your contract decides which series, which base month and whether a monthly or quarterly average is used.

Use your contract's clause

This is the generic index formula. CPWD's General Conditions of Contract have their own price variation clause (clause 10CC), with conditions on the stipulated period of the contract, the components, the indices, and how materials covered by other clauses are treated (check). State PWDs, NHAI, railways, PSUs and FIDIC-based contracts each have their own formulas, factors (such as 0.85), thresholds and caps, and some recover a fall in prices as well as paying for a rise. Read the clause in your agreement and set the inputs to match it; if your clause has a threshold or ceiling, apply it to the total shown here.

Worked example

Work done in the quarter is ₹1,00,00,000, all eligible. Using illustrative indices: material 30% with the index up from 150 to 156 (4%) gives ₹1,20,000; labour 25%, 140 to 147 (5%), ₹1,25,000; fuel 5%, 160 to 152 (−5%), −₹25,000; cement 10%, 130 to 136.5 (5%), ₹50,000; steel 15%, 150 to 141 (−6%), −₹90,000. The components cover 85% and the other 15% is fixed. Total escalation is ₹1,80,000, or 1.8% of the work done.

Sources: the price variation clause in your contract; CPWD General Conditions of Contract, clause 10CC (cpwd.gov.in); WPI from the Office of the Economic Adviser, DPIIT (eaindustry.nic.in); CPI-IW from the Labour Bureau (labourbureau.gov.in). Checked 22 October 2026.

Common questions

Which month is the base index?

The one your clause defines. Many government contracts tie it to the month in which tenders were due (check your clause); the current index is then the one for the month or quarter in which the work was done.

Can escalation be negative?

Yes. If an index falls, the formula gives a negative figure. Whether that is recovered from you depends on the clause: many recover decreases as well as pay increases.

What if the shares add up to more than 100%?

They should not. The shares of all components plus the fixed portion make up 100% of the eligible value. The calculator warns if the components exceed 100%.

Does escalation apply to work done after the completion date?

Contracts differ. Some freeze indices at the stipulated completion date for delays on the contractor's account. Check your clause and any extension-of-time decision.