You are here: Home » Economy & Policy » News
Business Standard

Lukewarm response to arbitration claims by infra developers

Failure of scheme was due to non-submission of bank guarantees, among others

Megha Manchanda  |  New Delhi 

Infrastructure

Settlement of by is slow because of the inability of road developers to provide bank guarantees and open escrow accounts, according to Ratings and Research (Ind-Ra).

The government’s initiative to release 75 per cent of the locked amount in awards has had a limited impact on the liquidity of developers as banks are wary of taking exposure through bank guarantees without adequate margins or collateral.

Ind-Ra said non-submission of bank guarantees despite reminders by the National Highways Authority of (NHAI) and non-opening of escrow accounts were the key deterrents to the success of the scheme, which was approved by the Cabinet Committee on Economic Affairs.

The scheme was approved on August 31, 2016, and the started accepting on December 7, 2016.

The rating agency said since introduction of the scheme, Rs 9,000 crore was released, against Rs 26,000 crore of

Hindustan Construction Company was the biggest beneficiary, receiving Rs 3,800 crore, the rating agency said, quoting data. The balance are pending due to absence of bank guarantees or escrow accounts.

Other companies that received their in full are IRB (Rs 2,700 crore), Shapoorji Pallonji (Rs 1,410 crore) and Atlanta Infra Assets (Rs 1,180 crore).

Companies that submitted but have not received funds include and its group companies (of Rs 2,830 crore), Company (Rs 1,540 crore) and Group (Rs 1,330 crore).

The had pending awards amounting to Rs 220,000 crore on March 31, 2015. According to the NHAI, 65 amounting to Rs 26,300 crore have been submitted by road developers and funds in 19 cases amounting to Rs 9,800 crore had been released or settled against margin-free bank guarantees as on May 26, 2017. 

RECOMMENDED FOR YOU