Claim Game
ROADS & HIGHWAYS

Claim Game

NHAI is facing arbitration claims amounting to over Rs 11,084 crore in tribunals and courts. It claims that its liability is close to 30 per cent of the amount claimed by the contractors. Madhavi Gokhlay reports...

National Highway Authority of India (NHAI), the nodal agency responsible for the development and maintenance of our national highways, will, over the next two years, shell out around Rs 3,000 crore, towards settling 300-odd pending claims of contractors. A majority of these claims concern Engineering Procurement and Contract (EPC) projects that were awarded in 2005-06.

For dispute resolution, aggrieved parties, whether NHAI or the contractors can approach the Arbitration Tribunal followed by the Dispute Resolution Board (DRB), and if they are still dissatisfied, drag the matter to court. Says Dr JN Singh, IAS, Member (Finance), NHAI, "An independent expert group will be looking into the cases, and deciding on whether NHAI should agree or litigate further. If the decision is not in our favour, and we are required to pay a penal rate of interest, it might be better to settle now at a lower rate than in future, when we might have to pay a larger rate of interest." NHAI is planning to tackle the easier cases first before going on to the more complex ones.

NHAI vs contractors

Why is NHAI faced with so many claims? "When you assign a project, you are not able to foresee the kind of complications that might arise. NHAI may be the prime body that activates projects but there are associated departments, interdepartmental agencies involved, which might raise issues and delay the project, impacting lead times, project schedules and so on," explains a highly-placed source at Gammon India. "The agency awarding the contract needs to do more ground work. Contractors too, need to get a bit more conservative while tendering projects. Possibly, they are not able to look beyond clinching the contract. Moreover, there needs to be greater transparency, with all stakeholders involved in the process right from the beginning."

A top source from another contracting company, who wishes to remain unnamed, says, "While NHAI has decided to settle some of the pending claims - those that are in the initial stages, and amounting to less than Rs 10 crore - we have no idea whether our claims will be settled. There has been no official communication to that effect." The source goes on to explain, "Land acquisition is done by the state government. It is well documented that most of the claims are due to delays caused in land acquisition. The other issue is the involvement of so many departments. For example, for the shifting of utilities such as electric poles, water supply lines, etc, the concerned state government departments take their own sweet time, causing delays."

But, aren't the contractors too, to blame? "It's not as if the contractors are without any shortcomings. Sometimes, they are technically ill-equipped to execute the work or there is shortage of manpower. Possibly, even the consultants appointed by them to supervise the work on behalf of NHAI are not of the right calibre. In such cases, NHAI is in a position to impose penalties on the defaulting contractors. However, if the delay is on the part of NHAI, contractors can only file claims, hoping to have them settled at some point in time. Interestingly, the claims against NHAI far out number the penalties imposed by them on contractors."

Beyond NHAI

So, is there a way around this situation? According to the source, it is not just about NHAI but also about better coordination between the central and state governments. Just as land acquisition is done by the state, shifting of utilities too comes under the jurisdiction of the state and its concerned departments. Considering NHAI's fresh target of awarding over 7,000 km of roads this fiscal, all parties involved had better get their act together to ensure that at least these projects see the light of the day.

NHAI is facing arbitration claims amounting to over Rs 11,084 crore in tribunals and courts. It claims that its liability is close to 30 per cent of the amount claimed by the contractors. Madhavi Gokhlay reports...National Highway Authority of India (NHAI), the nodal agency responsible for the development and maintenance of our national highways, will, over the next two years, shell out around Rs 3,000 crore, towards settling 300-odd pending claims of contractors. A majority of these claims concern Engineering Procurement and Contract (EPC) projects that were awarded in 2005-06.For dispute resolution, aggrieved parties, whether NHAI or the contractors can approach the Arbitration Tribunal followed by the Dispute Resolution Board (DRB), and if they are still dissatisfied, drag the matter to court. Says Dr JN Singh, IAS, Member (Finance), NHAI, An independent expert group will be looking into the cases, and deciding on whether NHAI should agree or litigate further. If the decision is not in our favour, and we are required to pay a penal rate of interest, it might be better to settle now at a lower rate than in future, when we might have to pay a larger rate of interest. NHAI is planning to tackle the easier cases first before going on to the more complex ones.NHAI vs contractorsWhy is NHAI faced with so many claims? When you assign a project, you are not able to foresee the kind of complications that might arise. NHAI may be the prime body that activates projects but there are associated departments, interdepartmental agencies involved, which might raise issues and delay the project, impacting lead times, project schedules and so on, explains a highly-placed source at Gammon India. The agency awarding the contract needs to do more ground work. Contractors too, need to get a bit more conservative while tendering projects. Possibly, they are not able to look beyond clinching the contract. Moreover, there needs to be greater transparency, with all stakeholders involved in the process right from the beginning.A top source from another contracting company, who wishes to remain unnamed, says, While NHAI has decided to settle some of the pending claims - those that are in the initial stages, and amounting to less than Rs 10 crore - we have no idea whether our claims will be settled. There has been no official communication to that effect. The source goes on to explain, Land acquisition is done by the state government. It is well documented that most of the claims are due to delays caused in land acquisition. The other issue is the involvement of so many departments. For example, for the shifting of utilities such as electric poles, water supply lines, etc, the concerned state government departments take their own sweet time, causing delays.But, aren't the contractors too, to blame? It's not as if the contractors are without any shortcomings. Sometimes, they are technically ill-equipped to execute the work or there is shortage of manpower. Possibly, even the consultants appointed by them to supervise the work on behalf of NHAI are not of the right calibre. In such cases, NHAI is in a position to impose penalties on the defaulting contractors. However, if the delay is on the part of NHAI, contractors can only file claims, hoping to have them settled at some point in time. Interestingly, the claims against NHAI far out number the penalties imposed by them on contractors.Beyond NHAISo, is there a way around this situation? According to the source, it is not just about NHAI but also about better coordination between the central and state governments. Just as land acquisition is done by the state, shifting of utilities too comes under the jurisdiction of the state and its concerned departments. Considering NHAI's fresh target of awarding over 7,000 km of roads this fiscal, all parties involved had better get their act together to ensure that at least these projects see the light of the day.

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