Friday, May 13, 2022

Construction sector sends SOS to PM, says hit by steep rise in material prices

Construction sector bodies have written to the PM to provide relief to the sector from an unusual steep rise in prices of raw materials

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  • ‘The infra and construction industry which had just risen from the pandemic lockdown is suffering due to steep rise in prices of basic raw materials’
  • ‘Many infrastructure contracts in the government sector may end up in failure under the pressure of very steep price rise of major construction materials’

New Delhi: The Indian Buildings Congress (IBC) and Builders Association of India (BAI), bodies representing the construction sector in India, has written to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman to provide relief to the infrastructure sector contractors from an unusual steep rise in prices of major construction raw materials, including cement, bitumen, steel, aluminium, diesel and copper in the recent months.

“The infra and construction industry which had just risen from the pandemic lockdown is suffering due to steep rise in prices of basic raw materials. The increased prices coupled with supply constraints, are impacting construction timelines. Prices of key raw materials, like steel, cement and bitumen have risen significantly in the last one year, which poses challenges for several sectors, especially infrastructure and real estate. These two (sectors) are still reeling from the impact of the pandemic and the ensuing lockdowns. The industry looks forward to appropriate steps by concerned government authorities,” said Vijay Singh Verma, President, Indian Buildings Congress (IBC) in the letter.

‘Govt construction projects may end up in failure’

“The government has been focusing on ‘Make in India’ and ‘Atmnirbhar Bharat’ campaigns wherein many infrastructure contracts in the government sector may end up in failure under the pressure of very steep price rise of major construction materials such as cement, steel, diesel, aluminium and electrical copper wires, unless a assuaging package for compensating the extra cost is given to the distressed contractors, wherein provisions for the payment of star rate payment, ie flat difference of cost owing to price difference is not in the contract agreements,” said KK Kapila, party president of Indian Buildings Congress (IBC) and Asia Pacific ambassador for FIDIC, the global body of consulting engineers.

“Various associations of contractors and builders in desperation, have approached various heads of the governments for relief, otherwise they will go bankrupt and the contract will fail, knowing fully well that the executives and bureaucracy cannot take any such step forward in favour of contracting communities by themselves. The Builders Association of India, in their submission to the Honourable Prime Minister of India and Honourable Finance Minister, Government of India, have provided enough proof and detailed analysis in support of their cause and to how steep price rise is adversely impacting their prospects of survival and success of the infrastructure projects,” said Kapila.

‘Want govt to look into steep price rise of raw materials’

“BAI has urged the government to look into various problems being faced by the construction industry in the country, including unbearable price increase due to the Covid pandemic, reimbursement of GST surcharge on ongoing works, the cost of tenders subject to GST, matter of updating Schedule of Rates (SOR), Standard Bid Documents (SBD) (Balance Contract) and reimbursement of increased price of construction materials on actual basis,” said Nimesh Patel, president, Builders Association of India (BAI), in a letter to the Prime Minister.

“The various state governments have a number of policies in its construction-related model agreements which lack clarity. Attempts have been made by Builders Association of India (BAI) to bring it to the notice of the government from time-to-time but no exact solution has been reached yet,” said Patel.

‘Any increase in price of raw materials will impact projects adversely’

“BAI has about 25,000 business entities as members and 200 branches across the nation. All our branches have written to the state governments and various project authorities, including NHAI, NHIDCL and MORTH (Ministry of Road Transport and Highways) to find a solution as any increase of construction material price will have consequential effect on the cost of housing and will also affect the infrastructure projects adversely, causing huge negative impact on the national economy,” said Patel

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