The prospect of reviving stalled projects in the construction and real estate sector brightened on Wednesday, with the Centre clearing a host of measures to resolve disputes and ease fund flows.
The proposals, put forward by NITI Aayog and cleared by the Cabinet Committee on Economic Affairs (CCEA), will allow faster resolution of disputes through arbitrations, setting up of an escrow account into which government agencies will pay 75 percent of the arbitral amount against margin fee guarantee and a provision for a conciliation board comprising independent experts.
Noting that the construction industry contributes 8 per cent to GDP and creates 40 million jobs, Finance Minister Arun Jaitley said the government was trying to redress the challenges faced by the construction sector.
A recent study by the Confederation of Indian Industry noted that pending claims from government bodies account for nearly 150 percent of the debts of construction companies. The escrow account can be used to repay bank loans or to meet commitments in ongoing projects. It will also strengthen the construction companies’ ability to bid for new contracts, an official release noted. The competition thus spurred would help contain the costs of public works, it added.
Public sector units and government departments have been asked to transfer cases under arbitration to the amended Arbitration Act, with the consent of the contractors.