BAI propagates Unified Standard Contract Document across India

- Niimesh Paatel, President

Builders' Association of India (BAI)

What opportunities do you see for engineering contractors and builders in the government's infrastruction creation programmes?

Construction sector being the core sector, a major part of the spending will be by the engineering contractors and builders. Hence, opportunities are huge for the Indian construction industry. I would like to add here that the spending will have backward and forward cascading effects. This is due to the fact that the construction industry caters to sectors such as iron, steel, cement, paints, electrical fittings, sanitary ware, and forward linkages to segments such as hotels, furniture, trade and transport, thus inducing economic development.

What are the various challenges faced by the construction industry in India?

Some of the challenges facing the construction industry In India are aging workforce and skills shortages - skill shortages have been a major issue in the construction industry for the last few years; health and safety, technology adoption, worker productivity, need of multiple clearances, difficult environmental regulations and influx in construction material costs.

The cost of key materials like cement and steel have risen over 20% annually. These constitute a predominant share in the total cost of construction. Real estate developers have been cautious about increasing prices as the market was recovering from the aftermath of Covid-19. However, they have now started feeling the pinch of rising cost and started reviewing their pricing strategy. As regards to infrastructure contractors, subsequent to their signing the contracts, the input material costs were rising phenomenally, putting them in trouble. BAI is advocating Star Rates or input material costs to be paid to the contractors as per their purchase invoice. The RBI has increased the repo rate due to which the interest rates on housing loans has increased, thus making home loans costlier and impacting buyer sentiment and thus hitting residential sales.

You have advocated the need for Unified Standard Contract Document for all governmental bodies. Can you further comment on it?

As of now, each department or works authority of the central and various state governments have their own contract document. This makes it difficult for infrastructure contractor who works with multiple works authorities. BAI is propagating a Unified Standard Contract Document across India. BAI agrees that it is not easy, since many departments or works authorities may have their own requirements or methods. For this BAI is suggesting that the core clauses be unified and respective departments or works authorities can have their own additional clauses as per their need.

As the President of the Association, what are your priorities to solve the constraints faced by the builder and contractor community?

As of now, I have taken up the issue of GST being increased from 12% to 18% even on ongoing work contracts. We have written to the GST Council through the Union Finance Minister to make it effective for new contracts. Simultaneously, we have written to all Central and State Government departments and works authorities to reimburse the increased 6% GST also. The rising prices of all construction materials are creating problems with the works budget of real estate developers and infrastructure contractors. As President of BAI, I am in touch with all concerned to see to it that the infrastructure contractors get paid at increased rates.

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