New Delhi: To revive construction and real estate sectors, the Union Cabinet today approved a slew of measures, including easing of rules for quick settlement of disputes, pumping in liquidity and dealing with stressed assets.
The decision allows contractors to move to the new speedier arbitration process, approve release of 75 per cent of the amount in dispute against bank guarantee and provides for a conciliation board comprising independent domain experts in new contracts.
Finance Minister Arun Jaitley said: “The construction sector is facing challenges and the government is trying to improve its functioning.”
He said: “The sector accounts for 8 per cent of the GDP and provides employment to nearly 40 million people. We have simplified arbitration law so that the process of dispute redressal can be made easier. We have also allowed establishment of a commercial court.”
The contractors have also been allowed to shift “with consent” their pending disputes with public bodies to the new arbitration procedures. “This will ensure a cheaper and a quicker fast track arbitral process,” Jaitley said.
During the pendency of an arbitral award being challenged by the public body, 75 per cent of the amount would be released to contractor against a bank guarantee.
The amount so released would have to be spent on discharging liabilities towards bank and financial institutions and any money left must be used in the projects. “This move will infuse the much-needed liquidity in the sector,” Jaitley said. The government has also come out with a provision for a conciliation board consisting of independent domain expert who will enter into contractual negotiations if there are changes in commercial circumstances around the project.
Besides, item rate contract would be replaced by turnkey contract and a model draft turnkey contract will be circulated. “The Department of Financial Services and the Reserve Bank of India will prepare a policy to deal with companies that have lot of stressed assets in the construction sector,” Jaitley said.
The measures were welcomed by the industry.
