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.