Kerala   

Government contractors to stop work on projects

KASARAGOD: The State Public Works Department seems to be headed for a major impasse with the government contractors serving a notice to discontinue ongoing works estimated to cost Rs.600 crore unless the government agrees to substantially increase the rates of work in the light of ‘abnormal increase the in prices of steel cement and other materials.’

Kerala Government Contractors’ Association State president Varghese Kannambilly said association members were forced to invoke clauses 55 and 56 of the Indian Contract Act, which allowed contractors to demand increase in rates in case of abnormal increase in the prices of materials and withdraw from agreements if the government failed to accede to the demands. Mr. Kannambilly said contractors had served notices to discontinue 211 road works and 63 building works of estimated to cost Rs.500 crore and Rs.100 crore respectively in the light of price rise.

Mr. Kannambilly said individual contractors had served the two-week notice to Superintending Engineers informing them that the current contract rates were insufficient and they would discontinue from work unless the rates were hiked.

According to him the price rise had made current contract rates unviable.

Pointing to the steep rise in prices of materials, Mr. Kannambilly said the price of steel which was Rs.35,000 a tonne in December 2007 was at present hovering around Rs.53,000 a tonne. The prices had hit a high of Rs. 54,000 a tonne in March and had come down a bit following intervention of union government, he said.

Still, the impact of intervention was not enough to sustain contractors, he pointed out.

In the present situation, the only viable way to sustain works was to introduce price variation clause in the contracts, said Mr. Kannambilly. If the prices of materials increased by more than five per cent after finalising tenders the government should compensate the contractor and in case the prices of materials fall by over five per cent the contractor should remit corresponding amount to the government, he said.

Mr. Kannambilly pointed out that several States in the country had already implemented price variation clause in the contracts and all developed nations had such provisions.

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