Power Minister okays dispute avoidance mechanism for hydro power contracts

New Delhi: Power Minister R K Singh has approved formulation of 'Dispute Avoidance Mechanism' for construction contracts of central public sector enterprises executing hydro power projects, the power ministry said on Wednesday.

The dispute avoidance mechanism mandates the appointment of independent engineers having domain knowledge of the subject for a specific project can have regular oversight over the project, with open communication with all the key stakeholders that can play an effective role in the avoidance of disputes, the ministry said in a release.

A "Dispute Avoidance Mechanism" through 'Independent Engineer' (IE), has been given approval by Union Minister of Power, New and Renewable Energy R K Singh, the ministry said.

It mentioned that the mechanism of appointing an independent engineer, third party, who is an "expert" having domain knowledge of the subject as well as commercial and legal principles, is widely used in major infra projects, nationally as well as internationally, for a specific project.

This mechanism seeks to reduce the conversion of initial disagreements over issues into full-fledged disputes, and also for expeditious elimination of disagreements in a just and fair manner. This will help avoid time and cost overruns so as to ensure timely completion of the Projects.

The hydro CPSEs had been raising concerns that the present mechanism of dispute resolution in hydro power sector did not provide adequate framework to address the conflicts between the employer and the contractor at their inception stage but only addresses it after the disputes have arisen and notified between the parties.

A committee of board level officers was constituted to study the field level issues and the difficulties in arriving at the resolution of these issues.

The committee observed that delays in addressing disagreements or claims related to execution of contracts actually results in significant financial and economic losses besides time and project cost over runs.

Fair and just resolution of disagreements related to contracts at inception stage, is key to successful performance of the contract as per scheduled timelines leading to both effective utilization of budget and prevention of time and cost over runs.