After dilly-dallying for years due to resistance from ministries dealing with infrastructure, the finance ministry has moved a plan to make it easier for companies to get 75% of the arbitration award in case of construction projects that were facing disputes.
National Highways Authority of India (NHAI) alone is to clear claims of over Rs 50,000 crore to road developers, despite the government agency losing cases in arbitration. The amount could easily top Rs 1 lakh crore if the claims related to railways and power are included, officials told TOI.
While a policy had been put in place three years ago, the awards are still not being made as the government agencies insist on bank guarantees equal to the 75% payout. Now, the finance ministry has moved a cabinet note to do away with this contentious issue, which companies said is resulting in payments being held back.
For companies, there is the additional issue of banks levying interest on the amount that is under 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 liquidity in the system but will also help some of the companies repay loans to banks. Several construction companies have turned NPAs as disputes with the government agencies have lingered on for years.
Source: EconomicTimes
