Cabinet approves NITI Aayog’s proposal to boost construction sector, restart stalled infrastructure projects

The Cabinet Committee on Economic Affairs has approved a slew of measures proposed by the National Institution for Transforming India (NITI) Aayog to boost the construction sector and restart stalled infrastructure projects. Under the new arrangement, government agencies will pay 75 per cent of the arbitral award amount into an escrow account against margin-free bank guarantees in cases where the award is challenged. The 75 per cent amount released into an escrow account will have to be spent by the contractor in completing the project and in discharging bank and financial institution dues. The Department of Financial Services, in consultation with the Reserve Bank of India (RBI), will also evolve a suitable one-time scheme for addressing the issue of stressed bank loans in the construction sector. Disputes will also be shifted to the new faster arbitration process that has been put in place. Going forward, in all new contracts relating to construction, there will be a provision for a conciliation board. Other measures under consideration are changes in bid documents and model contracts, and the increased use of conciliation methods.