Deferred payment system lands TMC under state scanner

Oct 15, 2014, 07:32 IST | Sharad Vyas

The corporation recently awarded road contracts worth Rs 600 crore to contractors under this system

Road contracts worth nearly Rs 600 crore awarded in August and September this year by the Thane Municipal Corporation (TMC) to contractors by way of a deferred payment system, have come under the state government’s scanner. The state urban development department (UDD) has raised objections over the corporation’s attempts at raising loans, to make staggered payment in five instalments for various road construction, widening and repair contracts at a high interest rate, as this could potentially benefit private contractors.

The TMC also plans to undertake repairs of the road  at Teen Hath Naka through  the deferred payment system. File Pic
The TMC also plans to undertake repairs of the road  at Teen Hath Naka through  the deferred payment system. File Pic

The UDD has put a TMC request to raise loans, made earlier this month, on hold, and has also put the corporation’s balance sheet under the scanner.

Under the TMC deferred payment plan, the corporation would not make any payment to the contractor and would not be charged interest for the first six months after the work was awarded. But, after this time limit got over, a staggered payment would be made at a high interest rate until the project was completed.

“This raises serious questions on how these road contracts were being awarded under the system at interest rates as high as 14-15%. We are analysing TMC’s balance sheets for the past three years to find out how they will sustain this loan and payment system despite weak finances,” said an official of the state UDD. He added that when the corporation has no money, it begs the question of how it intends to make payments in five instalments to contractors, leaving itself open to the risk of incurring losses in case work gets delayed. “In such a case, they would cause a substantial loss of public money if there is a variation in cost or delay on account of unforeseen circumstances. This is a high-risk plan,” said the official.

The TMC has given out contracts worth nearly Rs 600 crore to build ring roads, major roads and bridges and undertake repairs through the deferred payment system. The work includes widening and construction of roads in Pokharan, Cadbury Junction, Vartaknagar, Majiwada, Manpada, and construction of missing links in Shastri Nagar, Jankidevi Nagar, Bhimnagar and Gandhi Nagar.

The TMC has tracked as many as 20 major missing links — parts not constructed — in its road network over the past few years, many of which have been lost to encroachment etc. The links are 10-40 metres wide and vary in length. These will now be constructed, said a TMC official.

Another TMC official said the deferred payment mode is common practice and is followed by civic bodies across the state. “It is a win-win for both TMC and contractors,” he said.

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