Cabinet approves Initiatives to revive the Construction Sector

Published By : Admin | August 31, 2016 | 16:34 IST
Cabinet chaired by PM Modi approves initiatives to revive the Construction Sector
Govt’s initiatives to revive construction sector to provide stimulus to the industry and boost employment
Govt’s decision to revive construction sector to allow recovery of loans, speed up execution of ongoing projects

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi today approved various measures to revive the construction sector which has been undergoing stress.

Under the proposal put forward by NITI Aayog and approved by the CCEA. Government agencies would pay 75% of the arbitral award amount to an escrow account against margin free bank guarantee, in those cases where the award is challenged.

The escrow account can be used to repay bank loans or to meet commitments in ongoing projects. This is a major step which will allow recovery of loans by banks and allow construction companies to speed up execution of ongoing projects. It will also increase the ability of construction companies to bid for new contracts and the resulting competition will be beneficial in containing the costs of public works. This measure will provide a stimulus to the construction industry and to employment.

Government Departments and PSUs have also been instructed to transfer cases under arbitration to the amended Arbitration Act which has an expedited procedure, with the consent of the contractors. In the long run, other measures are also under consideration, including changes to bid documents and model contracts, and increased use of conciliation. NITI will also examine the idea of creating "claim take out funds" financed by private sector investors, while the Department of Financial Services will examine a suitable scheme for addressing stressed bank loans in the construction sector.

Background

The move comes in the backdrop of the need to have a slew of short-term and long-term initiatives to address the issues ailing the construction sector. The construction sector is a major contributor to economic activity accounting for about 8% of GDP. It is the largest creator of direct and indirect employment, employing about 40 million people. It is a highly employment intensive sector with a strong multiplier effect, creating an estimated 2.7 new jobs indirectly for every Rs. 1 lakh invested. It has major forward linkages to sectors like real estate, infrastructure and manufacturing and backward linkages to steel, cement, etc. Thus, this sector is critical for stimulating employment and economic activity.

In recent years, the construction sector has been affected by the large number of projects which got stalled during the period of stagnation between 2011 and 2014. The banking sector also has a large exposure to construction, estimated at over Rs. 3 lakh crores. 45% of the bank loans in the sector are under stress.

Studies have shown that a key factor behind the difficulties facing the construction sector is the pendency of claims from Government bodies. An estimated Rs. 70,000 crores is tied up in arbitration. Over 85% of the claims raised against Government bodies are still pending of which 11% is pending with the Government agencies, 64% with arbitrators and 8.5% with courts. The average settlement time for claims is estimated at more than seven years. A majority of arbitration awards have gone against the Government agencies. In the case of the National Highways Authority, out of a total of 347 arbitral awards, 38 went in favour of the authority and 309 went in favour of the contractor/concessionaire. Out of the arbitral awards in NHAI cases, more than 90% were unanimous awards in which all arbitrators including the one appointed by NHAI had concurred in the decision. In many cases, arbitration awards are contested in the courts, even though a large majority of arbitration decisions are upheld by the courts.

However, of late, the construction sector has been several challenges leading to decline in the overall investments and growth. The issues ailing the sector was discussed with the representatives of construction companies, banks, NHAI, concerned Departments/ Ministries. Based on detailed discussions, larger economic importance and multi-sectoral nature of the issues, NITI Aayog put forward the proposal to suggest various initiatives required for addressing the issues ailing the construction industry.

Explore More
No ifs and buts in anybody's mind about India’s capabilities: PM Modi on 77th Independence Day at Red Fort

Popular Speeches

No ifs and buts in anybody's mind about India’s capabilities: PM Modi on 77th Independence Day at Red Fort
Railways cuts ticket prices for passenger trains by 50%

Media Coverage

Railways cuts ticket prices for passenger trains by 50%
NM on the go

Nm on the go

Always be the first to hear from the PM. Get the App Now!
...
Viksit Bharat Ambassador Meet-Up in Pune: Volunteers Assemble To Pledge Towards Building a Developed India
February 28, 2024

Volunteers in Pune responded to PM Narendra Modi's call to become "Viksit Bharat Ambassadors" by hosting a national meet-up on February 28th at the Sumant Moolgaokar Auditorium, MCCIA. The objective of this meet-up was to gather local support for the Viksit Bharat Ambassador movement, which aims to make a developed India (Viksit Bharat) a reality by 2047.

The event was attended by Shri Rajeev Chandrasekhar, Hon'ble Minister of State for IT, Skilling and Entrepreneurship. Distinguished entrepreneurs, institution owners, corporates, and professionals from Pune were also present.

"In 2014, the economy that was left behind was one of the fragile five. 16 quarters of runaway inflations, 18 quarters of declining growth, a financial sector that had been shattered beyond bits, and an overall image of dysfunctional governance that was causing investors to pause and re-look at India. That was from 2004-14, which we refer to as a lost decade. From 2014-19, PM Modi rebuilt the economy and financial sector... The second term was about building the New India..." said Union Minister Rajeev Chandrasekhar at the 'Viksit Bharat Ambassador Meet'.

The Vision of Viksit Bharat: 140 crore dreams, 1 purpose

The Viksit Bharat Ambassador movement aims to encourage citizens to take responsibility for contributing to the development of India. To achieve this goal, VBA meet-ups and events are being organized in various parts of the country. These events provide a platform for participants to engage in constructive discussions, exchange ideas, and explore practical strategies to contribute to the movement.

Join the movement on NaMo App:

https://www.narendramodi.in/ViksitBharatAmbassador

The NaMo App: Bridging the Gap

Prime Minister Narendra Modi's personal app, the Narendra Modi App (or NaMo App), is a crucial technological link in taking this vision forward. The NaMo App has provided a platform for citizens to join, stay informed and create events around the Viksit Bharat Ambassador movement. Participants can easily track down and engage with various initiatives in their locality and connect with other like-minded individuals. The 'VBA Event' section in the 'Onground Tasks' tab of the 'Volunteer Module' of the NaMo App allows users to stay updated with the ongoing VBA events.


Ravi Petite, Managing Director of Agni Solar Pvt Ltd, highlighted the significant impact of PM Modi's vision on the booming solar energy industry, expressing confidence in its continuous growth without any signs of slowdown.

Dr. S Sukanya Iyer, Chairperson of the Mentoring Panel at CII's BYST, highlighted PM Mdoi’s commitment to inclusivity with the motto 'Sabka Sath, Sabka Vikas, Sabka Vishwas, and Sabka Prayas’ and inclusive approach for balance regional development from Kashmir to Kanyakumari.

Hemant Thakkar, the Technical Director of Pawar Rubber Products, acknowledged significant changes over the past 8-10 years, particularly highlighting government initiatives aimed at supporting entrepreneurs and MSMEs.

Investment Advisor Mandar Shende proposes that if all 140 crore Indians support the PM's vision of Viksit Bharat, India could achieve developed status by 2037 instead of 2047. He emphasized that this goal is not solely PM Modi's but belongs to every Indian.

Anurag Dhooth, MD of Epitome Component Pvt Ltd, emphasized that Viksit Bharat represents progress for all sections of society, noting ongoing transformative developments and global attention towards India.

Indraneel Chitale of Chitale Bandhu Mithaiwale commended the campaign, remarking that it effectively portrays India's narrative on the global stage.

Union Minister Rajeev Chandrasekhar encouraged citizens of Pune to join the movement towards building Viksit Bharat as envisioned by PM Modi by becoming Viksit Bharat Ambassadors. He highlighted India's remarkable transformation over the past decade, evolving from a fragile economy to one among the top five globally, and now serving as an inspiration to nations worldwide.