Finance Minister Nirmala Sitharaman on Wednesday announced up to six months extension for contactors to complete projects of central agencies including railways, amid the COVID-19 pandemic.
The move will benefit contractors hit by coronavirus pandemic as extension of contract period was announced with no associated penalties for not meeting project milestones.
Sitharaman announced extension of up to six months for completion of highways, railways and Central Public Works Department contracts, among others.
"The extension of up to six months without cost to contractor is to be provided by all central agencies like Railways, Ministry of Road Transport & Highways and Central Public Works Department," Sitharaman said.
She said this covers construction works and goods and services contracts besides obligations like completion of work, immediate milestones etc and extension of concession period in contracts on public private partnership.
To ease cash flows, government agencies will partially release bank guarantees, to the extent contracts are partially completed, she said.
Reacting to the announcement, Tata Projects Chief Strategy Officer Himanshu Chaturvedi said: The Government's Atmanirbhar Bharat initiative has recognised 'Infrastructure' as one of the five pillars. This is an acknowledgement of the sector's key role in India's development and large scale employment generation."
He said the extension of up to six months to be given by government agencies is a welcome move since many projects across the nation were affected due to the sudden disruption caused by the pandemic much of this such as lockdown was beyond the control of contractors.
"The move to allow government agencies to partially release bank guarantees to the extent of completed contract will definitely improve the industry's cash flow situation, especially in case of smaller and mid-sized contractors," he said.
Commenting on the move, Deloitte India said this is another example of simplifying the investment climate with contractors or concessionaires not having to seek extension on a case to case basis.
Arindam Guha, Partner, Leader Government and Public Services, Deloitte India said,"For road sector contractors and PPP concessionaires, a standstill period of six months has been announced with no associated penalties for not meeting project milestones, automatic extesnion of contract period etc."
Kunal Arora, Joint Partner, Lakshmikumaran & Sridharan Attorneys said,"Real estate developers and government contractors have been provided some relief in the form of a 6-month extension for completion of their ongoing projects. In addition, the bank guarantees for government contractors will be partially released to the extent of the completed works to increase liquidity in their hands."