Revival package for construction sector to address NPAs: CII

Hailing government's announcement of array of measures to revive construction sector, industry body CII today said it has come at an opportune time as it seeks to distress the liquidity woes of the construction companies that impacts the entire infrastructure sector.

"The Confederation of Indian Industries (CII) welcomes this huge and timely initiative taken by the government as this would unclog several stressed assets and revive projects that have been stuck over years in litigation and courts," CII said in a statement.

Director General CII Chandrajit Banerjee said the decision by the government will translate into a huge liquidity boost into the system which would save many of the companies from being declared NPAs.
 

"This will also allow recovery of loans by banks and allow construction companies to speed up execution of ongoing projects. Further, it will also increase the ability of construction companies to bid for new contracts and the resulting competition will be beneficial in containing the costs of public works," he said.

Seeking to revive construction and real estate sectors, the Cabinet Committee on Economic Affairs (CCEA) today approved an array of measures including easing of rules for quicker settlement of disputes, pump in liquidity and reinvigorate stalled projects.

"One of the major decision includes a direction to PSUs paying 75 per cent of award amount to the contractors against a margin free in cases where the PSUs have lost the Arbitration and goes on to appeal further in Courts. This amount will infuse liquidity and will be used by the contractors to repay bank loans or to meet commitments in ongoing projects," it said.

Government Departments and PSUs have also been instructed to transfer cases under arbitration to the amended Arbitration Act which has an expedited procedure, with the consent of contractors, it said.

This will help disputes to be settled expeditiously, with minimum cost & time overruns and unlock stuck money to go back into circulation in the economy, it said adding, it would be worth mentioning here that an estimated amount of around Rs 70,000 crores is expected to be unlocked due to this measure.

Commenting on the decision Atul Punj, Chairman of CII National Committee on Construction and chairman of Punj Loyd said that the broad spectrum measures announced by the government will help the construction sector that has the potential to generate jobs and investments into the infrastructure projects, a must to revive the economic growth.

Given the fact that construction sector generates the highest level of direct and indirect jobs employing about 40 million people with a 2.7x multiplier effect on Economy and being the second largest contributing nearly 8 per cent economic activities to the GDP, these initiatives are all set to trigger massive expansion of the infrastructure sector, it said.