India's construction sector gets govt boost

RECOGNISING that India's construction and real estate sectors need a boost, and to ensure that major projects held up for want of funds and heavy over-leveraging to banks get off the ground, the Indian government has taken a few decisions which might well set the economy on an upward path soon. Let us analyse some of these decisions.

The government led by Narendra Modi has relaxed arbitration procedures in the construction industry to ensure faster completion of projects and ease the problem of loan repayments. An array of measures - for quick dispute resolution, pumping in liquidity and dealing with stressed assets - has been put in place to revive stalled construction and real estate projects. The government has allowed the transfer of cases initiated under the old Arbitration Act to the purview of a new and expeditious dispute resolution law. It has approved the release of 75 per cent of the amount in dispute against bank guarantees and provided for a conciliation board comprising experts on new contracts. The arbitration law has also been simplified so that the process of dispute redressal can be made easier.

A commercial court has also been established. Contractors will henceforth have the option to shift their disputes with public bodies to the new arbitration procedures. In cases where arbitral awards have been made and public bodies challenge them, 75 per cent of the arbitration amount will have to be released to the contractor against a margin-free bank guarantee. The amount will have to be spent by the contractor to complete the project and pay back his or her dues to bank(s) and financial institution(s). The surplus can be spent on project expansion.