Monday 23 May 2011

Cuts in major projects: Is it new?

I recently had a casual talk with a construction company which has on-going projects all over India.  Fresh from a reading of open page in Hindu newspaper, which dealt with articles on corruption this week, in my talk with the representative of the company, out of curiosity I inquired about the amounts of money the contractors pay the public servants as cuts.  Though not unexpected, his revelation brought some clarity on the problem.
There are two aspects to the problem, one traditional, the other modern.  Traditionally, all construction companies of major infrastructure projects, across all the states of India, over the last many decades, have been paying percentages to the engineering personnel of the respective Governments.  The break-up when averaged across the States runs something like this: 0.3% to Junior Engineer, 0.25% to Deputy Executive Engineer, 0.2% to Executive Engineer, 0.1% to Superintendent Engineer, 0.1% to Chief Engineer.  Besides the engineering personnel, the treasury office takes 0.125%, the quality checking staff 0.1% and the Vigilance and monitoring staff 0.04%, totaling around 1.2% - 1.3% on an average.  It is said that these percentages are specific to the major infra projects and those for the minor infra projects are much higher.  Percentages when worked out in major projects will run into crores of rupees, hence in some states one or two months salary is paid traditionally to all the engineering personnel involved in the project every month, in place of the percentages.  However, of late the engineers have been demanding percentage based payments even in large infra projects.  The more the number of agencies involved in checking or monitoring the projects, the higher is the out go by way of cuts.  A classic case is that of third party quality control.  During earlier days, the quality control was conducted by the respective engineering departments, but now many State governments have been engaging private agencies to conduct third party QC.  The private employees of the third party QC agency also have got accustomed to this percentage system today.  The vigilance department too has its cut in every bill received by the company.  When asked what compels an honest and genuine contractor to pay the cuts, it was replied that even to complete the work in time, supervision of departmental staff is necessary on day to day basis.  If any company refuses to pay the cuts, the staff refuse to cooperate and work gets slowed down thereby resulting in huge payments for the idle men and machinery of the contractor.  Therefore, it makes practical sense for even the professional company to see that its expenditure on idle men and machinery, interest payments, arising out of delays in work dont exceed the cut payments to engineers.
 
The other problem, recent in origin, is that of payments to the elected heads of Governments while receiving large bill payments for the work done.  The increases in election expenditure has a role to play in this.  In the recent election to various states, it is learnt that some political parties paid up to Rs.2000 to each voter.  Any ambitious politician wanting to get reelected will necessarily have to mobilise resources during the time he is in office for the next election. When asked about the position in other countries, it is said that even in some developed nations, the contracting companies, through some way benefit the elected decision making head.  However, its hidden from public view, and doesnt affect either the lives of common man or the quality of the project.  

When I heard this, I didnt know whether I have to be happy because we are moving in the foot steps of advanced democracies where kick backs are confined to the top, or due to the fact that there is fair and equitable distribution of cuts even at the bottom. This problem is visible to public eye only because of the many poor quality projects being executed, non-commissioned projects, land being acquired unfairly for non-starter projects, active press and media.  Besides this, India is in a take-off stage today where a large number of mega-infra projects, each costing thousands of crores of rupees, are coming up.  Now, even the 1-2% in such projects will run into hundreds of crores, and in a country still suffering under the weight of the 60% poor and unstable families, cuts running into crores of rupees to its large number of lower-level officials is bound to attract public attention. 


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