Development Delayed By Failure To Clear Claims Promptly: CII

New Delhi, May 16 (UNI) Delays and higher costs in executing development projects were traced today in part to employers dragging feet on claims in an industry employing more than 31 million people.

''There is no punishment to an official for refusing a claim,'' according to study material circulated at the 5th Construction Summit held by the Confederation of Indian Industry.

President A P J Abdul Kalam said this week that Indian construction industry employs over 31 million people for its asset generating activity of over Rs 3,10,000 crore including Rs 2,00,000 crore government expenditure.

Construction accounts for 38 per cent of gross investment in India and 55 per cent of the cost of infastructure. It is the second largest employer after agriculture, estimated to have employed 18 million persons directly and 14 million indirectly in 2003-04.

Experts at the meet dwelt on growing urbanisation, infrastructural needs, such measures as Standard Contract Document and lawyers role as healers of conflicts, rather than hinderers.

A CII Background paper on Accelerating the Implementation of Infrastructure Development noted a ''high incidence of claims...

mostly rejected by the employer, irrespective of... merits.'' Such claims are then referred to a dispute resolution Board, whose award is again rejected by employers, after which the matter is referred to arbitration.

Even the arbitration award is often appealed in the courts and only in very few cases promptly implemented.

''This chain of events is unique in this country,'' CII said, adding that it is ''caused by officials' reluctance to take a decision at any stage'' because of audit or vigilance fears.

The chain of events results in substantial delay, sometimes years, before the contractor gets any relief, the CII paper said.

The consequences: higher costs, delay in project completion and quality dilution.

''Incidentally, there is no punishment to an official for refusing a claim, which is upheld by the DRB, Arbitrator and finally the Courts and results in substantially higher expenditure by way of interest and legal costs.'' The study said the DRB mechanism introduced by the World Bank in 1998 involves technical experts regularly visiting construction sites and adjudicating disputes practically on the spot.

It has worked very well in all countries expect India primarily because government officials are averse to risk, the CII document said.

It said the Bank has commissioned a study to assess the magnitude of the problem and explore solutions.

It said a practical solution would be to require the employer or contractor to pay a substantial part of the award secured by a bank guarantee before referring the issue to arbitration or courts.

Among steps emphasised at the meet were standardised contractual conditions to minimise disputes and faster dispute resolution mechanism.

Expediting dispute resolution was stressed by senior advocate Fali Sam Nariman, who acknowledged that lawyers were more often hinderances than promoters of solutions.

China, for instance, did not allow lawyers to play such a role.

It welcomed lawyers-- even foreign lawyers-- so long as they functioned as healers of conflicts.

The speakers included Planning Commission Deputy Chairman Montek Singh Ahluwalia, Finance (Economic Affairs) Secretary D Subba Rao, CII Infrastructure Committee chairman Vinayak Chatterjee and Construction Federation of India President Ajit Gulabchand.

UNI