Key NITI Aayog Recommendations That Will Help Construction Sector

The Cabinet Committee on Economic Affairs (CCEA) recently gave its approval to a number of NITI Aayog proposals that are likely to revive India's ailing construction sector. Pending court cases and a liquidity crunch are cited among the major reasons behind this, and the plan body's proposals are expected to cure the sector of these two ailments.

A look at some of the proposals:  

Contractors will now have the option to switch to the amended Arbitration Act in case of a dispute with public sector entities. The shift is expected to make the process more cost effective and help in the settlement of the disputes in a timely manner.

In case where government entities challenge an arbitral award, they will have to provide 75 per cent of the amount in question to the contractor against a bank guarantee. The payment to be made into an escrow account must be used by contractors for payment of lenders' dues or project completion.

In case the subsequent court order requires refund of the money paid by a government entity, the contractor will have to refund the amount along with an interest. The rate of interest will be decided by the government department.

Public Sector Units or PSUs will either calculate their own cost of capital or take State Bank of India's one year marginal cost of fund-based lending rate, plus two per cent.

Subject to contractual provisions, retention money and other withheld amounts may also be released to contractors against a bank guarantee.