The NITI Aayog is looking to revive the construction sector by working out a plan to remove hurdles for projects where contractors are locked in arbitration with government agencies.
The government think-tank is readying a proposal through which funds would be released to banks in cases where there is unanimous award in favour of a contractor. In these cases the plan is to release 75% of the funds to the banks, which can be used for reducing the loans extended to the companies. Alternatively, it can be released to the contractor for use in projects.
"We do not want to wait for the appeal to be settled because it often takes time. This will help release funds and revive stalled projects," said an officer, who did not wish to be identified. Close to Rs 3.6 lakh crore is locked up in such cases and banks will see their performance improve even if a part of the funds are released. Sources said that only a part of the amount is related to projects where there is unanimous award during arbitration.
Market players said the move would help improve cash flows and reduce stress on companies.
SOURCE: ETRealty
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