The departments of public works, water resources and urban development, which take up major infrastructure projects like building roads, bridges and irrigation works, have been affected by the hike in prices of steel, cement, sand and fuel, which have seen a whopping appreciation (between 20 to 30 per cent) in less than one year.
While the price of a tonne of steel has gone up from Rs 45,000 to almost Rs 70,000, a bag of cement is costing Rs 80 to Rs 100 more. Price of M-sand has also seen a rise of Rs 100 to Rs 150 per tonne.
“It is quite natural for cost of projects to rise when raw material prices go up. The public works department has also been affected. We are yet to work out by what percentage project costs have gone up,” said PWD minister Govid Karjol.
A senior official from PWD pegged the cost escalation at 25 to 30 per cent over the original estimates. He, however, said since the government has not taken up any new major infrastructure project in the last one year owing to financial constraints caused by Covid-19, the impact of price rise is considerably less.
Meanwhile, the PWD and water resources departments have reportedly approached the finance department seeking more allocations to fund the gap in cost. Contractors have also been aggressively pushing for upward revision of estimates.
Lakshman Rao Peshwe, secretary, water resources ministry, said revision of project estimates is a continuous process as prices of goods keep changing. Every project will have a provision for it. “But this time it is conspicuous as prices have risen significantly. Usually, we allow revision of estimates only when projects are 80% complete,” he said.
Another senior official from the finance department said the cost escalations will not have much impact on state finances as this loss will be compensated by the additional tax revenue it gets on account of rise in prices of goods and commodities.
ISN Prasad, additional chief secretary, finance department, said it was too early to assess the burden of price rise on the state’s treasury. “We may spend a little more on the projects, but we will also be getting a little more tax due to price rise. So, it is very hard to assess,” he said.