+
Karnataka Alters Clause to Allow Delay in Contractor Payments
ECONOMY & POLICY

Karnataka Alters Clause to Allow Delay in Contractor Payments

The Karnataka government has modified a critical clause in its standard tender documents, allowing departments the option to delay payments to contractors for public works. This move by the Siddaramaiah administration comes amid rising tensions with contractors over unpaid dues amounting to Rs 320 billion (approximately £3 billion).

Since April 2007, standard tender documents mandated that government departments pay contractors within 60 days of bill submission. The clause previously read: “The employer (government department) shall pay the contractor within 60 days of the submission of bill.”

However, a new order issued by the state’s finance department on 6 June amends this to: “The employer shall, as far as possible, pay the contractor within 60 days of submission of bill.” The revised wording effectively weakens the obligation to make timely payments and offers the government leeway to justify delays.

The change applies to contracts ranging from less than Rs 2 million to those valued between Rs 10 million and Rs 1 billion. The finance department clarified that the amendment is valid for tenders invited henceforth and does not affect those already issued.

A senior official justified the change as a safeguard against litigation, stating that the government often struggles to disburse funds on time. “The phrase ‘as far as possible’ allows room to explain payment delays,” the official said.

Contractors, however, have criticised the decision. R Manjunath, president of the Karnataka State Contractors Association, remarked that the 60-day clause was rarely adhered to in practice. “We regularly had to sue the government and claim interest on delayed payments,” he noted.

In addition to facing delayed payments, contractors undertaking works worth more than Rs 10 million but less than Rs 1 billion remain liable for liquidated damages if project progress falls short. Manjunath pointed out that delays are often caused by ground conditions or postponed ground-breaking events due to political factors.

The policy revision is likely to aggravate the already strained relationship between the state and its contractors, potentially impacting the pace and efficiency of public infrastructure works across Karnataka.

The Karnataka government has modified a critical clause in its standard tender documents, allowing departments the option to delay payments to contractors for public works. This move by the Siddaramaiah administration comes amid rising tensions with contractors over unpaid dues amounting to Rs 320 billion (approximately £3 billion).Since April 2007, standard tender documents mandated that government departments pay contractors within 60 days of bill submission. The clause previously read: “The employer (government department) shall pay the contractor within 60 days of the submission of bill.”However, a new order issued by the state’s finance department on 6 June amends this to: “The employer shall, as far as possible, pay the contractor within 60 days of submission of bill.” The revised wording effectively weakens the obligation to make timely payments and offers the government leeway to justify delays.The change applies to contracts ranging from less than Rs 2 million to those valued between Rs 10 million and Rs 1 billion. The finance department clarified that the amendment is valid for tenders invited henceforth and does not affect those already issued.A senior official justified the change as a safeguard against litigation, stating that the government often struggles to disburse funds on time. “The phrase ‘as far as possible’ allows room to explain payment delays,” the official said.Contractors, however, have criticised the decision. R Manjunath, president of the Karnataka State Contractors Association, remarked that the 60-day clause was rarely adhered to in practice. “We regularly had to sue the government and claim interest on delayed payments,” he noted.In addition to facing delayed payments, contractors undertaking works worth more than Rs 10 million but less than Rs 1 billion remain liable for liquidated damages if project progress falls short. Manjunath pointed out that delays are often caused by ground conditions or postponed ground-breaking events due to political factors.The policy revision is likely to aggravate the already strained relationship between the state and its contractors, potentially impacting the pace and efficiency of public infrastructure works across Karnataka.

Next Story
Infrastructure Energy

UERC Rejects Pleas Over Cancelled 200 MW Solar Awards

The Uttarakhand Electricity Regulatory Commission (UERC) has rejected review petitions filed by 12 solar developers against the cancellation of Letters of Award (LoAs) issued under the state’s 200 MW Solar Programme.The scheme, launched by the Uttarakhand Renewable Energy Development Agency (UREDA) under the 2013 solar policy, aimed to help Uttarakhand Power Corporation Ltd (UPCL) meet its renewable purchase obligations through tariff-based competitive bidding.The projects—classified under the Type I category—had original commissioning deadlines in 2019–2020, later extended multiple ti..

Next Story
Infrastructure Energy

Solarium Wins Rs 266 Million Rooftop Solar Orders

Solarium Green Energy has secured two significant work orders valued at a combined Rs 266 million for rooftop solar projects across various locations in the Northeastern States, under the Ministry of Home Affairs.The first order, worth approximately Rs 129.8 million, was awarded by NTPC Vidyut Vyapar Nigam Limited (NVVN) for the development of a 3,319 kW rooftop solar photovoltaic (PV) project. This was tendered under the NVVN’s “Selection and Discovery of L1 Rates for Rate Contract for EPC of Grid Connected Rooftop Solar PV Projects (51–200 kW) across India”. The project is scheduled ..

Next Story
Real Estate

Omaxe Secures Rs 5 Billion From Oaktree For Expansion

Omaxe Group has raised Rs 5 billion in funding from Oaktree Capital Management LP, a global investment firm specialising in alternative investments, to fuel the development of ongoing projects and support future growth plans.In a regulatory filing dated 28 July, the company confirmed that the funds will support construction and infrastructure development across key markets, including New Chandigarh, Lucknow, Ludhiana, and Faridabad. The capital will also be directed towards flagship projects such as Omaxe State in Dwarka, an upcoming integrated township in Amritsar, and a new township in Indor..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?