G.V.R. Subba Rao

VIJAYAWADA: Builders appear to have got a favourable response from Chief Minister Y.S. Rajasekhara Reddy to their plea to review input costs every month, instead of once in three months as in vogue now, in view of the rise in the price of steel.

With the rising cost of building materials like steel and sand affecting housing works taken up under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and other government programmes, a delegation of builders represented the matter to the State Government recently.

“The Government has responded positively to our submission.

It has agreed to review the rates every month,” said K. Anil Kumar, managing director of KCP Projects Limited, on Saturday.

Escalation formula

Mr. Anil Kumar was one of the builders who represented the issue to the Chief Minister. His firm is constructing houses under JNNURM near Disney Land in the city.

The Chief Minister reportedly told the delegation that the Government was implementing escalation formula to insulate the builders from sudden and sharp rise in the prices of materials, as per which the Government calculates the escalation in the cost of materials once in every three months, taking the price index in to consideration.

The builders, however, impressed upon the Chief Minister that they were unable to absorb the sharp and arbitrary rise in the prices of steel though escalation formula was being implemented.

The price of steel at the time of estimation was Rs. 27 a kg, while it soared to Rs. 52 to Rs. 58 a kg now.

The component of steel in housing would be 20 per cent of the total cost.

In other words, the impact of steel on cost would be around 14 to 15 per cent. Similarly, the cost of railings, grills, cast iron, GI pipes and so on had also gone up. Consequently, the construction cost had gone up by 25 per cent, the builders said.

Officials of the Vijayawada Municipal Corporation (VMC) explained that the Government had decided to take the steel prices from public sector firms like the Steel Authority of India Limited (SAIL) and the Visakhapatnam Steel Plant (VSP) before revising the rates.

The Government would pay the difference to builders after calculating the rise in the prices every month.

The Chief Engineer would be asked to review the prices every month.

The Government was yet to work out the rules for the proposed new mechanism, they said.