Karthik Subramanian

They say there is a gross mismatch between government rates and market prices of materials

  • Contractors not even bothering to purchase tender forms
  • Civic body's storm water drains department is the most badly hit
  • Andhra Pradesh order on price adjustment for materials `could be way out'

    CHENNAI: Chennai's real estate business may be booming, but construction by government agencies, particularly the Chennai Corporation, is facing a slowdown.

    Building contractors are not even bothering to purchase the tender application forms for the civic agency's projects, saying there is a gross mismatch between the government rates and market prices.

    Costs of construction materials, including cement, steel and blue metal, have risen, but project estimates are still based on the schedule of rates released last year.

    One contractor affiliated to the Builder's Association of India said ideally they expect the government rate schedule to be released in April every year.

    This year it has been inexplicably delayed.

    The storm water drains Department of Chennai Corporation has been the most badly hit by the crisis.

    Storm water drain

    Officials had hoped to complete storm water drain construction and repair works of Rs.10 crore before the advent of North-East monsoon.

    But there have been no takers for nearly Rs. 5 crore worth of works.

    The contractors are not even purchasing the tender applications. "What is the use of spending Rs.1,000 on the tender applications when you know full well that the price estimates have not taken into account the cost escalation," a contractor asked.


    In sheer desperation, officials have offered to hand over projects to contractors quoting up to five per cent above the estimated price but even that has not had any impact. Builders Association of India (Southern Centre) chairman L. Moorthi said an order similar to Andhra Pradesh Government's order on price adjustment for materials, including steel, bitumen and cement, could be a way out.

    In April, the Andhra Pradesh Government extended its price adjustment clause for all ongoing works, irrespective of value of work and the agreement period.

    "Such a move will instil confidence among contractors to take up government projects. Otherwise, most of them are likely to move into the private sector," a contractor said.

    Cost escalation

    Contractors are also worried about further escalation of costs of construction materials, following the government announcement extending regularisation of unapproved plots as well as buildings to areas outside the Chennai Metropolitan Area.