New rules to end disputes with infra cos
NEW DELHI: After two years of delay due to the resistance of the ministries that deal with infrastructure, the Ministry of Finance has moved a plan to facilitate companies to obtain 75% of the arbitration award in case of construction projects that They face disputes.
National Highway Authority of India ( NHAI ) It is only to clarify the claims of more than Rs 50,000 crore to road developers, even though the government agency loses cases in the arbitration. The amount could easily exceed Rs 1 lakh crore if claims related to railways and energy are included, authorities told TOI.
Although a policy had been implemented three years ago, the awards are not yet made, as government agencies insist on bank guarantees equivalent to the payment of 75%. Now, the finance ministry has moved a cabinet note to eliminate this controversial issue, which companies say is resulting in withholding payments.
For companies, there is the additional problem that banks raise interest on the amount that is in dispute.
Government officials said the finance ministry has suggested that the interest burden should be borne by the agency that holds back payments, a move that will put the burden on NHAI, railways and the power sector PSUs.
Payment to these companies will not only increase the liquidity in the system, but will also help some of the companies pay the loans to the banks. Several construction companies have turned to NPAs as disputes with government agencies have persisted for years.
Industry experts said the 75% payment scheme has not been successful since Indian Bank Association (IBA) came out with strict guidelines to give bank guarantee.
“Initially, only a couple of large companies obtained the benefit. Banks were reluctant to give bank guarantees until they had a 100% margin for such payments. Therefore, now even renowned companies cannot obtain the bank guarantee. Smaller developers have almost no benefits. We have suggested to banks that they should take into account the projects that a developer is carrying out in any state when granting the bank guarantee, ”said P C Grover, general director of the NH Builders Federation.