June 23, 2006	Friday	Jumadi-ul-Awwal 26, 1427

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PESHAWAR, June 22: The cost of public sector construction incurred on roads, buildings and pavements has gone up considerably because of a recent increase in composite scheduled rates (CSRs), according to official sources.

The government raised the CSRs — on the basis of which contracts for construction works are issued — in last December to neutralise negative financial impact of price escalation.

Justifying the move, development planners told this correspondent that the government had prepared the CSRs last time in 1999, whereas during last six years prices of construction material had significantly risen.

Since construction cost, said the planners, had risen manifold over the years due to increase in prices of cement, steel, bricks, wood and other construction material, the provincial government succumbed to pressure exerted by some strong private sector contractors and their demand for increasing the CSRs was heeded for.

A high level official committee — comprising representatives of the finance, planning and development, irrigation, communication and works and public health engineering departments — decided to upward revise the CSRs.

On the average, rates of construction works were increased by 70 per cent, according to a development planner.

Though the quantum of raise varied from sector to sector in the case of roads, buildings, water supply and sanitation, the aggregate outcome of the increase would drastically escalate the construction cost of official works.

“In simple words, we can say that under the new scheme of things, Rs100 will be spent on the work which was earlier done for Rs50,” said an official source.

Provincial Minister for Finance and Planning and Development Sirajul Haq confirmed that the cost escalation had negatively impacted the provincial kitty.

However, the new rates will be applicable to new development schemes only and ongoing projects will continue to be executed on the basis of old CSRs.

The government intends to launch 236 new development schemes under the locally-funded component of the ADP 2006-07.

Officials said that the increase would undermine the government’s ability to undertake vital infrastructure projects as the new construction rates would eat up substantial amount of the funds.

The provincial government has underlined an ambitious ADP for the 2006-07, envisaging a development outlay of Rs26.63 billion.

“The increase has depreciated the value of money that will go to new construction projects and as a result the development process will be undermined,” said a finance manager. The increase means that the government will spend more on less work.