In a move to revive the construction sector, NITI Aayog is working out a plan to remove hurdles for construction projects where contractors are locked in arbitration with government agencies. The think-tank has circulated the proposal for consultation with other ministries as well as lenders.
It is working on a proposal through which funds would be released to banks in cases where there is unanimous award in favour of a contractor. In these cases, the plan is to release 75 per cent of the funds to the banks, which can be used for reducing the loans extended to the companies. Alternatively, it can be released to the contractor for use in projects. Only a part of the amount is related to projects where there is unanimous award during arbitration, as per reports. Waiting for the appeal to be settled often takes time, and the government think-tank does not want to wait for it. Nearly Rs 3.6 lakh crore is locked up in such cases, and even if a part of the funds are released, banks will see their performance improve.
The move is expected to help improve cash flows and reduce stress on construction and infrastructure companies.