Contractors’ liability

This is in reference to news “R&B Deptt fails to clear contractors liability worth over Rs 500 cr in J&K” published in DE on 15th February 2020.It is very strange that the contractors work done liabilities since the financial year 2015-16,2016-17, 2017-18 and 2018-19 are still outstanding to be cleared by the Government. As per the news item the contractors are running from pillar to post to get their dues from the Government and despite highlighting their grievances at different levels i.e Executive Engineers, Superintending Engineers , Chief Engineer, Advisors to the then Governor and Lt Governor. Out of 500 crores liability near about 400 crores pertained to Kashmir Division and round about 90 crores pertained to Jammu Division. It appears that Government has not taken it seriously to clear the liabilities since the financial Year 2015-16.The reasons may be best known to them.
It will not be out of place to mention here that contractors are executing the works allotted to them by incurring expenditure from their own pockets or taking loans from the banks or relatives as each contractor is not financially so sound to invest in business in lakhs without having hope of early return. If their payments are held up for indefinite period how the fresher would be encouraged to invest in construction industry. Due to on line tendering process the contractors are facing huge competition and quoting their rates below 25 percent of the advertised rates. Thus presently the margin of profit has been reduced .No doubt by adopting on line tendering process the Government is benefitted as earlier tenders would be quoted above the advertised cost in most of the cases. This new system has also arrested other malpractices while awarding the contracts. I failed to understand that how the liabilities were created when majority of the contracts are awarded now below the advertised cost. For instance the advertised cost of a work is 10 lakhs and the contract is awarded to the lowest tenderer who quoted the rate below 20 percent of the advertised cost .It means the contract is awarded for Rs 8 lakhs. Then how there is liability because there is a saving of Rs 2 Lakhs even if the contractor is paid full for his work done as per the contract.
In view of the position stated above it is felt that the old liabilities of the contractors need to be cleared at the earliest so that the construction industry may not suffer. Government may also initiate measures to avoid incurring of liabilities in future.
New Plots , Jammu