In an attempt to revive construction and real estate sectors, the Union Cabinet on Wednesday approved an array of measures including easing of rules for quicker settlement of disputes, pump in liquidi
In an attempt to revive construction and real estate sectors, the Union Cabinet on Wednesday approved an array of measures including easing of rules for quicker settlement of disputes, pump in liquidity and reinvigorate stalled projects.
It allowed transfer of cases initiated under the old Arbitration Act to the new and expeditious dispute resolution law, approved release of 75 per cent of the amount in dispute against bank guarantee and provided for a conciliation board comprising of independent domain experts in new contracts.
Also the finance ministry and RBI will consider giving one-time scheme for stressed bank loans in the sector.
Lauding the government’s decision, industry body CII said that it has come at an opportune time as it seeks to destress the liquidity woes of construction companies and the infrastructure sector.
“Indian industry welcomes this positive and timely initiative taken by the government as this would unclog stressed assets and revive projects that have been stuck over years in litigation and courts,” said Chandrajit Banerjee, director-general, CII.
Briefing reporters after the meeting of the Cabinet, finance minister Arun Jaitley said that the construction sector accounts for eight per cent of the GDP and provides employment to some four crore in the country.
The banking sector’s exposure to the construction sector currently stand at over Rs 3 lakh crore, and 45 per cent of Rs 1.35 lakh crore of the loans are under stress.
“We hope that a series of these decisions will pump in a lot of liquidity into the sector, activate real estate and infrastructure projects which have been stranded for sometime and support the entire process of dispute resolution in relation to construction and real estate,” Mr Jaitley said.
An official statement said that a key factor behind the difficulties facing the construction sector is the pendency of claims from government bodies. An estimated Rs 70,000 crore is tied up in arbitration. Over 85 per cent of the claims raised against government bodies are still pending of which 11 per cent is pending with the government agencies, 64 per cent with arbitrators and 8.5 per cent with courts.
The contractors have also been allowed to shift “with consent” their pending disputes with public bodies to the new arbitration procedures, from the old arbitration act.
An average settlement time for claims is estimated at more than seven years.
This will ensure a “cheaper and a quicker fast track” arbitral process, the finance minister said.
