Everything official about figures

In reference to the report, 8216;8216;Corridor crawls, cost overrun picks speed8217;8217;, the National Highways Authority of India has written to say

In reference to the report, 8216;8216;Corridor crawls, cost overrun picks speed8217;8217; April 20, the National Highways Authority of India has written to say, 8216;8216;While it is true that the award cost/km comes to about Rs 6.4 crore on average based on accepted tenders in 2005, it has to be kept in mind that the government approval for Phase II at Rs 5.14 crore/km was based on 2002 prices. If this cost is updated for inflation in 2002-5, the cost would come to Rs 6 crore/km. Besides, there has been an unprecedented rise in prices of cement, steel and bitumen in the past three years. Since the contracts provide for escalation and contractors are entitled for compensation due to increase in prices, it cannot be predicted at this stage, as reported by your paper, that the cost will further rise to Rs 7.65 crore/km by the time the project is completed.8217;8217;

The NHAI further says, 8216;8216;The article also claims that the cost of all the NHDP phases has increased by 30 per cent from an estimate of Rs 1,69,500 crore in January 2005 to Rs 2,20,000 crore in January 2006. Besides the cost of the balance of work in Phase I and II, the above figure primarily refers to cost for Phase IIIB to Phase VII. As is known, these phases are awaiting approval of the government and the costs are still to be finalised. To say, then, that costs have increased by 30 percent when there is no government approval, is speculative.8217;8217;

Senior Assistant Editor Kandula Subramaniam replies:

The report was based on official meetings in April 2006 chaired by Montek Singh Ahluwalia, deputy chairman of the Planning Commission, to review the implementation of decisions of the Committee On Infrastructure.

The NHAI disputes the per km cost mentioned in the story. The figure of Rs 7.65 crore/km is not a 8216;prediction8217; but an officially stated figure. A meeting on April 3 recorded that 8216;8216;going by historical time and cost overruns, the cost per km might exceed Rs 7.65 crore per km, implying a total expenditure of over Rs 50,000 crore on NHDP II8217;8217;. The meeting also discussed how such 8216;8216;excess expenditure would crowd out development of other highways8217;8217;.

As for the cost escalation of 30 percent being incorrect since approval for Phases IIIB to VII are yet to come in, this was the exact statistic presented to Prime Minister Manmohan Singh at a April 8 meeting. In fact, the report of the inter ministerial core group on NHDP financing which includes the Finance Ministry, the Planning Commission and the Surface Transport Ministry has this to say: 8216;8216;The unit costs and specifications have been adopted provisionally but the Group expressed concern over the revision of costs from Rs 1,69,500 crore project in January 2005 to Rs 2,20,000 crore projected in January 2006. This will be adjusted on the basis of recommendations to be made by an expert group which has since been constituted by the Surface Transport Ministry.8217;8217;

Until the core group finalises the final cost after the expert group submits its report, the figure to consider will remain Rs 2,20,000 crore.