New Delhi: In the encouragement for the construction sector, the Ministry of Finance has issued new norms that will help facilitate the release of project funds where arbitration award has been challenged by the government department.
This step will meet the need for liquidity needed for the company, some of which are arrested in disputes with government institutions that have led for years.
Part of the funds is also intended to be used for project resolution, which may have been detained because of disputes.
In fact, the decision on the release of funds for these projects was taken five years ago but only now that the department of expenditure has issued a detailed guideline that changes general financial rules (GFR).
This step is seen as part of the government’s efforts to ensure that payments that are delayed cleaned and liquidity are available with the company, which can be hijacked back to new projects and contracts and creates demand for related industries such as steel and cement.
The Ministry of Finance has encouraged the department to meet their capital expenditure target for the current financial year and promised that it was ready to free funding to institutions that wanted more resources to take productive projects and produce assets.
Minister of Finance Nirmala Sitharaman has met various ministries on this issue.
In this case, the department of expenditure said that based on the recommendations of Niti Aayog, GFR had been amended to provide that in cases where the government department had challenged the arbitration award, producing an unpaid amount to developers or contractors, 75% of the awards (including interest ) It will be paid to the concession or developer holder against the bank guarantee submission (BG).
BG will be paid to the Ministry or Department concerned if the court ordered the contractor to return money.
The Ministry of Finance said that the money would be deposited to an Escrow account provided that the funds were first transferred to the lender and then used for the project settlement.
Every remaining amount can be used by the concession holder, subject to the approval of the main banker.
It’s been a long time, companies in the construction sector complained about disputes that accommodate funds and projects that have been given to them.
Some developers faced problems with lenders because money had been detained in a dispute over the years, which resulted in them to stop taking government projects.