Govt, Don’t Hold Up Con­trac­tor Pay­ments

The Economic Times - - The Edit Page -

Here is one way for the cen­tral govern­ment to im­prove the ease of do­ing busi­ness in In­dia, never mind if it contributes to the World Bank’s rank­ing. The best part of this mea­sure is that it is di­rectly un­der the con­trol of the cen­tral govern­ment. The thing to do is to re­lease pay­ments to pri­vate sec­tor com­pa­nies that per­form var­i­ous tasks for it, rang­ing from build­ing high­ways and bridges to pro­vid­ing in­for­ma­tion tech­nol­ogy so­lu­tions and sys­tems. The govern­ment and pub­lic sec­tor en­ter­prises owe con­trac­tors lakhs of crore ru­pees in un­paid bills for work com­pleted and de­liv­ered. The rea­sons are many. The root cause is lack of own­er­ship of the projects in the govern­ment. This re­sults in the project re­port be­ing less than re­al­is­tic. So, once the project gets im­ple­mented, change in project de­sign or de­tail be­comes in­evitable. De­lays in re­leas­ing funds leads to time and cost over­runs. If the fi­nal bill ex­ceeds the amount of the ini­tial ten­der, no one in the govern­ment wants to take the re­spon­si­bil­ity for ap­prov­ing pay­ment of this higher amount: what if some re­port of the Comptroller and Au­di­tor Gen­eral were to fault him for caus­ing loss to the ex­che­quer. So, the way out is to re­fer the mat­ter to ar­bi­tra­tion. That award would nor­mally go in favour of the con­trac­tor. The of­fi­cial still would not want to take any chance. The con­trac­tor would then go to court. The court would, in the full­ness of time, up­hold the ar­bi­tra­tion award. Thus de­risked, the suc­ces­sor of­fi­cial — the ear­lier one would have re­tired or been trans­ferred — would now re­lease the pay­ment.

This style of func­tion­ing jacks up project costs and slows down both the projects un­der ex­e­cu­tion and the com­pa­nies that im­ple­ment them. The govern­ment has to find a way of de­risk­ing the de­ci­sion to ap­prove higher-than-bid costs.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.