Infrastructure projects face the heat as cement prices rise

By C Shivakuamr
Infrastructure projects across the State have been hit by the rise in the cost of cement and building materials and the government is revising the estimates of many projects.
TNHB sources told Express that rise in the prices of cement had an impact on many of the projects as tenders were being revised. “For example, the tender for the construction of a `120 crore Oil and Natural Gas Corporation (ONGC) housing project is undergoing revision due to the rise in the cement and building materials cost,” TNHB sources said.
Chennai Corporation too is facing the pinch as it has sent in a revised proposal of an additional `27.52 crore to the Centre for the implementation of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) scheme to strengthen minor drains and construct stormwater drains. “Initially, an amount of `1,447.91 crore was sanctioned by the Union government. The scheme was planned keeping in mind the cost of building materials at that time. With the rising prices of building materials and delay in implementation of the project by the previous government, we are seeking additional funds from the Union government,” Chennai Mayor Saidai Duraiswamy said.
While the costs of future projects are being reworked out, officials feel that big ongoing projects won’t feel the impact as of now. “This is due to the escalation of price clause in the government contract,” official sources on condition of anonymity said. As per the clause, “Any increase or decrease in prices of materials and fuel shall be adjusted … irrespective of the actual variation in prices (to the contractor).” This acts as a price cushion, he said. The clause is absent in smaller projects, which makes them vulnerable to price escalation.
In India, there are around 365 small and 140 large cement plants, whose combined production capacity is approximately 234 million tonnes (MT). The retail cost of cement has spiraled from `260-275 a bag of 50 kg about six months ago to `340. The prices haven’t dipped despite the Competition Commission of India (CCI) penalising some firms for cartelisation of cement.
Similarly, the price of sand per unit is around `5,000 – up from about `3,000. Officials feel the government should have direct control over the cement sector like it has on sand mining. “The government should fix the price of cement to avoid the possibility of artificial rise,” an official said. Is that the way forward? The jury is out.