Steps taken by the government to revive the construction sector will likely release Rs 39,366 crore to contractors and concessionaires, the NITI Aayog said today.
The Aayog has operationalised the measures announced by the Cabinet Committee on Economic Affairs (CCEA) last week.
The CCEA allowed contractors to move to the new speedier arbitration process, approved release of 75 per cent of the amount in dispute against bank guarantees and provided for a conciliation board comprising independent domain experts in new contracts.
Briefing the media, NITI Aayog CEO Amitabh Kant said as per information available with it, 597 cases are presently under arbitration proceedings or pending before courts in respect of four major infrastructure CPSUs — NHAI, NTPC, NHPC and IOCL.
Claims worth Rs 52,488 crore are involved in these cases.
“In terms of the instructions issued by NITI Aayog, 75 per cent of this amount, Rs 39,366 crore, is likely to be released to the contractors/concessionaires on furnishing bank guarantees,” Kant said.
He said the measures are expected to release a substantial amount of liquidity for the construction industry, help them meet their debt obligations, help banks in taking care of their NPAs and release resources for completion of the stalled projects.
“In essence, these measures open the gateway for the revival of the construction sector which is second largest employment provider,” he said.
The construction sector accounts for 8 per cent of the GDP and provides employment to some 40 million people.
Dwelling on the positives of conciliation mechanism, Kant said NHAI had settled claims of more than Rs 19,000 crore during last three years through its independent settlement committee for about one-tenth of the claimed amount.
He added that deliberations with major stakeholders revealed that 618 awards have been announced by the Arbitration Tribunals in respect of three CPSUs — NHAI, ONGC and NHPC, of which 158 have gone in favour the state- owned firms and 460 in favour of contractors.
He also made a case that item-rate contracts may be substituted by EPC (turnkey) contracts, wherever appropriate.
The NITI Aayog CEO further said that the method of conciliation has proved more effective in settling disputes as per experience of some PSUs.