NHBF

Nhbf/019/373/10-11 January, 06, 2010

To,
Senior Economic Advisor,
Office of the Economic Advisor
Ministry of Commerce & Industry
Udyog Bhawan, New Delhi-01

Sub: - Request for issuing a clarification of Price Indices

Dear Sir,

Our association, National Highways Builders Federation is an apex body of

Highway developers in our country. The highways sector in India is witnessing
significant interest from both domestic as well as foreign investors following the
policy initiatives taken by the Government of India.

As you are aware, our members are also undertaking (On Item Rate Basis) the
construction of National Highways, State Highways and by which developing the
infrastructure facilities in our country. Agreements are of various values and
executed over a period of 2 ~ 5 years at places across the country. Monthly
Payments are released to Contractors based on progress and certification of bills.

In most of the Contract there is provision for escalation to cover up the future
contingencies. Escalation on material, labour, equipments etc. are paid based on
increase in Whole Sale Price Index published by Reserve Bank of India/
Department of Economic Affairs.

Contract Agreement also provide –

Quote

“If, after the date 28 days prior to the latest date for submission of tenders for the
Contract there occur in the country in which the Works are being or are to be
executed changes to any National or State Statute, Ordinance, Decree or other Law
or any regulation or bye-law of any local or other duly constituted authority or the
introduction of any such State Statute, Ordinance, Decree, Law, regulation or bye-
law which causes additional or reduced cost to the Contractor, in the execution of
the Contract, such additional or reduced cost shall, after due consultation with the
Employer and the Contractor, be determined by the Engineer and shall be added to
or deducted from the Contract Price and the Engineer shall notify the Contractor
accordingly, with a copy to the Employer.”

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 NHBF
Unquote

At times there is abrupt changes in rate of Royalty, Cess, Entry Tax, Sales Tax by
the concerned State Government having huge impact on cost of some of the item
like sand, aggregate, stone etc. a vital input in construction contract.

Employer/Executing Agencies are of the opinion that Whole Sales Price Index
(WPI) published by the Government of India includes impact of such rise in Local
Taxes/Royalty/Entry Tax etc. While Contractors are of the opinion that WPI does
not include impact of rise in Local Taxes/Royalty/Entry Tax declared by a
particular State and are eligible for reimbursement of such hike in addition to
normal escalation paid based on WPI.

It requires a clarification from your good office whether WPI published by

Government of India take in to account hike in Entry Tax, Sales Tax, Royalty etc.
declared by State Government. It will help in resolving the number of disputes
pending with Employer/Executing Agencies and Contractor.

An early response in the matter is highly appreciated.

Thanking You,

Yours faithfully,
For National Highways Builders Federation

M.MURALI
Director General
Mob : 9871160490

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