The wages increased but contractor had quoted for three years as per vda calculation 7-8% yearly increse

sir,
This time MAHARASTRA GOVT had increased wages 100% basic plus VDA as too but when contract with govt department and they asked for three quotation as per every six month VDA taken into account and same was done going perfactly @ 7-10% vda yearly but now as this burden who will bear as this can't be assumed or perdictable while quotating and if even do so will not get contract or if even then the department would have not given tender award as ferk rates too high then thier essitmate. kindly advice who will pay this extra payment.

Dear Suresh,
Section 21(4) of the CLRA Act,1970 imposes vicarious liability on the Principal Employer for payment of wages to contract labor engaged by him. It includes the obligation of payment of wages not less than the statutory minimum wages also. Therefore, the reasons cited in your post as defense is quite untenable and the PE, particularly being a Government department, can not approve of any tender quoting lesser amount comprising of wages falling short of the statutory minimum rates of wages during the currency of such a contract.

To put in short, The govt department has to pay minimum wages and not stick to contract rates if they are lower than government stipulated rates.

I may like to add that if there is a steep hike in the minimum wages during the currency of any contract, it is certainly a situation of cost escalation necessitated by the operation of law and as such the contractor can legally demand enhancement of his charges under the escalation clause in the original contract. No government agency or department would simply turn down such a fresh demand by any existing contractor because the contractor can stop his work forthwith and change of contractor would not be possible at this juncture on the pre-revised rates.

This is a common problem in Govt dept. Most of the departments are now mentioning a line that " Whenever there is change in Basic/VDA, the contractor will first pay the difference to the workers and then claim reimbursement from the Principal employer by showing proof of payment. Delhi High court in its judgement dated 20th September, 2012 in the case of Peoples Union for Democratic Rights & Ors V/s Union of India has suggested on page no 61 that If any establishment floats a tender and where the minimum wage rate is less than the one which is to be amended or even the current one, then tender shall be rejected with penalty

Dear Suresh,
This problem is existing every where but mostly to those are having closed contract. Where the contract is signed for longer period having the escalation clause in contract to cope-up with such problem. To tackle such issues you have to put a separate clause in LOI or Work Order issued to the contractor.
In each contract there remains clause to reimburse the cost, if it goes substantial high than the rate quoted or any new imposition of tax & duties shall be also applicable.
Therefore, you need to discuss the matter with principal employer for change in contract or put the clause.