Irrigation project contractors in Andhra Pradesh have decided to stop work from January 10 if the government fails to enhance the rates by 15-20 per cent of the gross value of the projects related to balance works of at least 46 prioritised for the time being.
These projects form part of a grand irrigation plan, worth over Rs 1.6 lakh crore, unveiled by then chief minister YS Rajasekhara Reddy after the Congress returned to power in the state in 2004. However, all these projects got delayed beyond the EPC contract period that ended in 2008 for most of the works and were given extension by the government.
The contracts, though inflated the order books of companies, had actually proved a drag on the infrastructure players as only Rs 30,000 crore worth of works were executed during the actual contract period and another Rs 30,000 crore worth works had been done beyond the actual time lines resulting in cost overruns. Close to Rs 1 lakh crore worth of contracts, which were awarded when YSR was chief minister, remain a non starter.
Announcing their decision on Thursday, P Mohan Reddy, state unit chairman of Builders’ Association of India (BAI) said most of the works could not even be grounded during the EPC period due to delays on account of land acquisition, forest clearances and approvals for project designs as the government lacked enough manpower to handle them at one go.
“Now the material and labour costs have gone up 57 per cent since the contracts were awarded. If the government does not take these cost escalations into account we have no choice but to stop all the works and request for termination of contracts. We are bleeding,” he said.
The contractors are willing to complete works at 15-20 per cent rise in gross value of these projects, which otherwise would cost double the money if fresh tenders for the same are invited, according to the BAI president. Their demand also extends to all the Rs 30,000 crore works that were completed after the EPC period.
The BAI office bearers who spoke to the media are typically Category 2 contractors who were given work packages below Rs 100 crore. Most of them also work as sub-contractors for companies like Gammon India, IVRCL, Sew, Patel Engineering and Madhucon Constructions, who had got big size packages through the EPC bidding process.
The state government led by chief minister N Kiran Kumar Reddy had shortlisted 46 projects, which are at an advanced stage of completion, for funding on a priority basis. They are expected to require about Rs 11,000 crore more to complete and the contractors' request for enhancement of gross value of the project packages would result in an additional financial commitment of close to Rs 4,000 crore, the BAI said.
The government in the past had come under sever criticism from the opposition for allegedly awarding the projects at higher cost estimations. When contacted, an official of the irrigation department said the concerns expressed by the contractors were already under examination.
