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economics of on-farm development - Institute for Social and ...

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Cost escalati<strong>on</strong> due to arbitrati<strong>on</strong> awards, departmental lapses <strong>and</strong> unintended<br />

payments to c<strong>on</strong>tractors<br />

The arbitrati<strong>on</strong> awards <strong>and</strong> unscrupulous payments made to the c<strong>on</strong>tractors<br />

appear to be a major source <str<strong>on</strong>g>of</str<strong>on</strong>g> cost escalati<strong>on</strong> in the irrigati<strong>on</strong> projects in Kerala.<br />

The CAGI reports bring out clearly the rent seeking behaviour <str<strong>on</strong>g>of</str<strong>on</strong>g> the irrigati<strong>on</strong><br />

bureaucracy. A review <strong>for</strong> the period 1985-86 to 1998-99 brings out the very<br />

functi<strong>on</strong>ing <str<strong>on</strong>g>of</str<strong>on</strong>g> the irrigati<strong>on</strong> sector in Kerala. loaded with problems <str<strong>on</strong>g>of</str<strong>on</strong>g> rent-seeking<br />

<strong>and</strong> nepotism. The reports bring out various sources <str<strong>on</strong>g>of</str<strong>on</strong>g> cost-escalati<strong>on</strong> in irrigati<strong>on</strong><br />

projects in Kerala. They are: (i) extra expenditure due to delay in communicating<br />

acceptance <str<strong>on</strong>g>of</str<strong>on</strong>g> tenders; (ii) extra expenditure due to change <str<strong>on</strong>g>of</str<strong>on</strong>g> specificati<strong>on</strong>!<br />

defective estimati<strong>on</strong>; (iii) n<strong>on</strong>-recovery <str<strong>on</strong>g>of</str<strong>on</strong>g> advances. cost <str<strong>on</strong>g>of</str<strong>on</strong>g> materials from<br />

c<strong>on</strong>tractors: (iv) extra expenditure due to departmental delays: (\) defective<br />

<strong>for</strong>mati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> canal systems; (vi) change in scope <str<strong>on</strong>g>of</str<strong>on</strong>g> the scheme in the course <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

executi<strong>on</strong>: <strong>and</strong> (vii) irregular additi<strong>on</strong>al payment <strong>for</strong> earthwork excavati<strong>on</strong>.<br />

Evidently, the unintended expenditure involved in all the above cases have been<br />

substantial adding to cost escalati<strong>on</strong> in irrigati<strong>on</strong> projects.<br />

There are several evidences to show that the arbitrati<strong>on</strong> awards given to the<br />

c<strong>on</strong>tractors have caused enormous burden <strong>on</strong> the financial allocati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

irrigati<strong>on</strong> department. For instance. in the Kallada irrigati<strong>on</strong> project. from October<br />

1984 to March 1993. 258 cases were referred <strong>for</strong> arbitrati<strong>on</strong> as per the specificati<strong>on</strong>s<br />

approved by the World Bank. Out <str<strong>on</strong>g>of</str<strong>on</strong>g> the 172 awards passed as <str<strong>on</strong>g>of</str<strong>on</strong>g> March 1993. a net<br />

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