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Huge project cost escalation is suspect

mumbai Updated: Dec 02, 2011 01:35 IST
Bhavika Jain
Bhavika Jain
Hindustan Times
Brihanmumbai Municipal Corporation

The one thing that indicates the nexus between contractors, bureaucrats and politicians is huge cost variations in a project in relation to the original estimated cost, say civic activists.

In the past two years (2010-11), the Brihanmumbai Municipal Corporation (BMC) has spent an additional Rs 2,245 crore of taxpayers' money by increasing the cost of various contracts. What was originally estimated to have cost the BMC Rs 3,505 crore has now shot up to Rs 5,750 crore; the difference is more than 60%.

"Cost escalations are allowed despite repeated opposition because it suits the interest of all three parties [politicians, bureaucrats and contractors]. The proposal to allot more money to an ongoing work is presented to the standing committee in such a way that if more funds are not allotted, the project will get stalled," said Aftab Siddiqui of the H-west Federation.

Cost variations peaked in 2009-10, prior to the imposition of the code of conduct for the Lok Sabha and Assembly polls. The BMC doled out Rs 1,300 crore, of which Rs 900 crore went towards variations. Majority of these contracts - Rs 660 crore of Rs 1,300 crore - were for road projects.

"These escalation requests were backed by letters from senior leaders of all political parties," said a civic official from the accounts department, on condition of anonymity.

A big problem is that there is no check on the work done by contractors so deadlines get extended, resulting in cost escalation.

Making matters worse is the fact that the irregularities are not detected in time because of the to delay in maintaining audit records. The BMC has not prepared the balance sheets for the last three years, for which it has been pulled up by the state.

Sources explain how variations are planned. One formula is for contractors to demand more money claiming an increase in the scope of work. For this, the contractor ropes in the local corporator who signs his request and passes it on to the head of the concerned department, who in turn prepares a proposal to be put up before the standing committee for approval.

Another formula is to show cost escalations as outstanding bills and liabilities for which provisions were not made at the start. Every year, the BMC clears high cost escalations without issuing fresh tenders as is required.

"Contractors often prepare bogus bills for work that has not been carried out. Without inspecting the site, officials clear the bills," said Vinod Bajpai, an RTI activist who found that a contractor had sent the Mulund ward office Rs 26 lakh bill for laying a new sewer line when nothing was done.