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Service tax and other issues plague Corporation tender process
April, 02nd 2012

The past week has been tough going for the Coimbatore Corporation, which had to negotiate with contractors to ensure that they accept the bids to take up works.

Last week, the Corporation saw engineering contractors withdraw from the tender process, citing escalation in cost of materials and poor financial viability in taking up the projects at the present rates. Their grievance was that by taking up the projects, they would not be able to complete the work and only incur loss.

To substantiate their action, the contractors say that the price of bitumen has shot up by 15 per cent, steel by close to 40 per cent and blue metal by 20 per cent. The price of cement has also gone up. In short, there is huge price difference between the market price and the price mentioned in the Public Works Department's Schedule of Rates.

The contractors attribute the increase in price to power cut, which has pushed up the cost of production. Industries, big or small, are forced to increase the production cost to factor in the use of fuel to power machines. As for civil works, the contractors are unable to find adequate water for curing, which again they attribute to power cut.

Contractors say that to tide over the crisis, they are waiting for the new financial year, when the PWD will come up with the new schedule of rates, which will, to an extent, reflect the market price.

Corporation officials, however, asked the contractors to take up the projects, convincing them for the need for doing so. The contractors responded favourably for a few projects but not for all.

The Corporation also faced some challenge from lessees of Corporation assets, who opposed the proposal to implement service tax. The civic body, citing a Central Government order, asked all lessees to pay around 10 per cent of their lease amount towards service tax.

The contractors opposed the move saying they will incur loss. They even petitioned the Corporation officials seeking withdrawal of the tax. They say that they have quoted less than the tender amount to factor in the 10 per cent service tax.

This, according to sources, has forced the Corporation to cancel the tender and invite fresh bids. Sources say that the civic body is talking to the contractors to ensure a win-win situation.

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