Price Escalation Calculation With Explanation and Solved Example

Price Escalation Calculations Steps

Step 1) Finding Various Indices :- 

The indices are published by Directorate of Economics and Statistics, Govt. of Maharashtra

go to their website

select --> Consumer price indices and critiques of various essential commodities Tab

Monthwise list of indices appears

Following Tabulated Components are listed in respective Indices

COMPONENT	Index to be Considered	Published by
Labour Component	Various Important Price Indices / Consumer Price Index	Directorate of Economics and Statistics, Govt. of Maharashtra https://mahades.maharashtra.gov.in/publications.do
Material Component	Wholesale Price Index	Directorate of Economics https://eaindustry.nic.in/
P.O.L. Component	Ex. Refinery Mumbai, Deisel Price only	RBI
Cement Component	Various Important Price Indices	RBI
Steel Component	Various Important Price Indices	RBI

Example of Labour Indices

Example of Material and P.O.L. Indices

Step 2) Calculation of Basic Price Index

       

Tender Received month = August 21

so Basic index will be Average of Previous quarter

(Note:- to calculate select months from dropdown list only)

 Step 3) Special Relief Calculations

For Labour

$${V_1}={0.85{\left({P - \text{Cost of Schedule A materials used}}\right)\times {\left({K_1}\over 100\right)\times \left({{L_1}-{L_0}}\over {L_0}\right)}}}$$ 

Where,

V₁ = Amount of Price variation to be allowed

P = Cost of Work done during the period under consideration

K₁ = Percentage of labour component as indicated above

L₀ = Basic Consumer price index for _____________ Centre.

L₁ = Average Consumer price index for _____________ Centre ascertained during the period under consideration.

For Material

$${V_2}={0.85{\left({P - \text{Cost of Schedule A materials used}}\right)\times {\left({K_2}\over 100\right)\times \left({{M_1}-{M_0}}\over {M_0}\right)}}}$$  

Where,

V₂ = Amount of Price variation to be allowed

P = Cost of Work done during the period under consideration

K₂ = Percentage of Material component as indicated above

M₀ = Basic Wholesale price index for _____________ Centre.

M₁ = Average Wholesale price index for _____________ Centre ascertained during the period under consideration.

For P.O.L.

$${V_3}={0.85{\left({P - \text{Cost of Schedule A materials used}}\right)\times {\left({K_3}\over 100\right)\times \left({{P_1}-{P_0}}\over {P_0}\right)}}}$$   

Where,

V₃ = Amount of Price variation to be allowed

P = Cost of Work done during the period under consideration

K₃ = Percentage of P.O.L. component as indicated above

P₁ = Average price of HSD for Mumbai during the period under consideration

P₀ = Average price of HSD for Mumbai on the date 30 preceding the last date prescribed for receipt of tender.

For Bitumen Component

$${V_4}={{Q_B}({B_1}-{B_0})}$$   

Where,

V₃ = Amount of Price variation to be allowed for Bitumen component

Q_B = Quantity of Bitumen in metric Tonnes used in the permanent works and approved enabling works during the quarter under consideration

B₁ = Current average ex-refinery price per metric tonne of bitumen under consideration including taxes during the quarter under consideration

B₀ = Basic rate of bitumen in rupees per metric tonne as considered for working out value of P or average ex-refinery price in rupees per metric tonne of Bitumen for the grade of Bitumen under consideration prevailing quarter preceding the month in which the last date prescribed for receipt of tender falls, whichever is higher.

For HYSD and Mild Steel Component

$${V_5}={{S_P}\left({{S_1}-{S_0}}\over {S_0}\right)\times T}$$   

Where,

V₅ = Amount of Price variation to be allowed for HYSD/Mild Steel component

T = Tonnage of steel used in the permanent works for the quarter under consideration

S_P = Basic Rate of HYSD/Mild Steel in rupees per metric tonne as considered for working out of P

S₁ = Average Steel index as per RBI Bulletin during the period under consideration

S₀ = Average Steel index as per RBI Bulletin for the quarter preceding the month in which the last date prescribed for receipt of tender falls.

For Cement Component

$${V_6}={{C_P}\left({{C_1}-{C_0}}\over {C_0}\right)\times T}$$   

Where,

V₆ = Amount of Price variation to be allowed for Cement component

T = Tonnage of steel used in the permanent works for the quarter under consideration

C_P = Basic Rate of Cement in rupees per metric tonne as considered for working out of P

C₁ = Average Cement index as per RBI Bulletin during the period under consideration

C₀ = Average Cement index as per RBI Bulletin for the quarter preceding the month in which the last date prescribed for receipt of tender falls.

For C.I./D.I. Pipe Component

$${V_7}={{Q_d}({D_1}-{D_0})}$$     

Where,

V₇ = Amount of Price variation to be allowed for C.I./D.I. Pipe component

C_d = Pig Iron Basic price in rupees per tonne considered for working out value of P.

D₁ = Average Pig iron price in rupees per tonne during the quarter under consideration.

Q_d = Tonnage of C.I./D.I. pipe used in the works during the quarter under consideration.

 Solved Example (Editable)

(Note:- to calculate select months from dropdown list only)

 Bitumen Price List (Work In progress)

Date	VG 10 Price	VG 30 Price	VG 40 Price
01/03/2023
15/03/2023
01/04/2023
15/04/2023
01/05/2023
15/05/2023
01/06/2023
15/06/2023
01/07/2023
15/07/2023
01/08/2023
15/08/2023
01/09/2023
15/09/2023
01/10/2023
15/10/2023
01/11/2023
15/11/2023
01/12/2023
15/12/2023
01/01/2024	40490	41290	43660
15/01/2024
01/02/2024
15/02/2024	41470	41770	44230
01/03/2024
15/03/2024
01/04/2024