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NITI Aayog proposes easier arbitration norms for infra firms

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NITI Aayog has prepared a Cabinet note that proposes if arbitration awards favour infrastructure companies, the government should pay up. If the award is unanimous, no appeal should be made, it adds.
It has also suggested infrastructure ministries ease arbitration norms and release stalled payments.
“This will de- bottleneck project development and will avert loss of time and blockage of capital,” said Kameswara Rao, partner (grid), PwC.
Rao said it was not uncommon for infrastructure projects to face local implementation challenges and executing agencies should be empowered to accept reasonable variations.
“Agencies must not fear subsequent challenges to their decisions,” he added.
Bank executives said the proposal in the Cabinet note would help improve the financial health of companies.
Companies facing payment delays could start repaying interest and principal on outstanding loans, they added.
Niti Aayog’s proposal comes at a time when ? 1.65 lakh crore of banks’ ? 3.65 lakh crore exposure to the construction sector is stressed.
Project delays are largely on account of environment clearances and land acquisition.
“Definitely, this will help settle claims as capital will not be locked up,” said Vishwas Udgirkar, senior director, Deloitte India.
“Maybe 50- 70 of the arbitration award can be paid if someone is moving to appeal,” he added.
ICRA Vice- President Rohit Inamdar said if implemented, this would provide liquidity to several projects where arbitration awards had been announced.
“The pace of arbitration needs to be accelerated to ensure quick dispute resolution,” he added.
Business Standard New Delhi,26th August 2016

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