It is the govt's duty to stabilise the prices of construction materials
The Federation of Contractors' Association of Nepal (FCAN), an umbrella organisation of the country's contractors, decided to observe a 'construction holiday' beginning Sunday to protest against the skyrocketing prices of construction materials.
This decision will severely impact the construction works of government-funded projects, which have already been delayed due to other factors not associated with the price rise of construction materials.
As per the statistics provided by the Financial Comptroller General Office, the government has spent only 28.35 per cent of the total budget allocated under the capital expenditure in the past 10 months. The FCAN has said it had no option other than to announce a construction holiday – halting all construction work – because of the sudden hike in the prices of construction materials such as fuel, cement, steel re-bars, sand and boulders, which are essential to carry out any construction work. The contractors find it very difficult to carry on with their construction works of government projects when prices of these materials soar, far beyond the estimated cost at the time of bidding. The ongoing war in Ukraine and the disruption in the supply chain worldwide due to the resurgence of COVID-19 in China have led to the rise in petroleum products and other goods, including domestic ones.
The price of steel rebar, for example, which used to cost Rs 65 per kilo, has more than doubled to Rs 135 following the war, while the cost of diesel has gone up to Rs 145 per litre from Rs 85 a few months ago. Similarly, the price of cement has gone up to Rs 600 per sack from Rs 500 earlier.
The contractors say the accumulative cost of construction has crossed by more than 70 per cent, and they have around Rs 340 billion in bank loans. As per the FCAN, out of the total 5,000 government projects under construction, 3,500 of them, worth Rs 5 trillion, have been halted, citing soaring prices of construction materials. The FCAN also staged sit-ins on Monday in front of all the district administration offices and the seven provinces, demanding price adjustment in the government projects. It may be recalled that the government had to issue the Price Adjustment Guidance-1 in 2008 when the prices of construction materials jumped unexpectedly.
Going by the market price of all commodities, the concern shown by the FCAN is genuine, and it should be addressed without any further delay so that the construction work of government projects can move ahead as per schedule. If the government does not address their problems on time, most government works, which are carried out through competitive biddings, will be delayed, which will ultimately lead to cost overruns. Daily-wage unskilled workers, who are mostly employed in the construction sector, will be hit the hardest should the construction holiday continue for a long time. The contractors usually take part in the bidding process of the government projects, calculating the base price of the construction materials that exist at the time of the bidding. So, it is the duty of the government to stabilise prices of construction materials and other goods so that the government projects could be completed on time, that too, within the limit of the cost estimates.
The residents of the Kathmandu Valley must be elated by the resumption of drinking water supply from the Melamchi River in Sindhupalchowk to their homes after a hiatus of about 10 months. The Melamchi project had begun supplying water to the valley on March 28 last year, but it was disrupted after heavy floods and landslides in Sindhupalchowk on June 5 buried its headworks under heavy deposits of sand and stones. Since the debris at the headworks has yet to be cleared, water is being supplied temporarily using alternative gates to funnel water from the river into the tunnel.
The Melamchi project is, however, to remain shut during the monsoon for security reasons, which means the valley will again go back to water rationing. To meet the shortage, there are plans to purify water of the Bagmati River and distribute it to the households. The Melamchi project remains the only hope for the valley's residents amidst the acute drinking water problem being faced for decades. It's hard to predict the vagaries of the weather. So the concerned authorities must do whatever it takes to provide full protection to the project's structures at the site so that the Kathmandu Valley can enjoy uninterrupted water supply, summer or winter.
A version of this article appears in the print on April 26, 2022, of The Himalayan Times.