Challenge arbitration awards carefully: Govt
2 min read 16 Jan 2022, 11:48 PM ISTGovt urges state units to be realistic and avoid project delays, cost overruns
PremiumNEW DELHI : The government has asked its arms, including state-run firms, not to appeal every arbitration award without the realistic probability of success to avoid project delays and cost overruns as often such appeals are lost, and the government ends up paying more in terms of interest and penalty, two people aware of the development said.
This is part of the government’s recent guidelines to implement projects expeditiously and efficiently as public expenditure is key to accelerating growth and creating jobs, the people cited above said, requesting anonymity. Like the previous year, the forthcoming budget on 1 February will bank on infrastructure projects to boost the pandemic-hit economy, said one of the people cited above, who works in the finance ministry. Budget 2021-22 enhanced capital expenditure by 34.5% to ₹5.54 trillion. The government also expects its ₹111 trillion National Infrastructure Pipeline (NIP) to boost growth.
The covid-19 outbreak in March 2020, followed by a 68-day nationwide hard lockdown, saw India’s gross domestic product (GDP) shrink 24.4% in the first fiscal quarter ended June 2020, followed by a 7.4% contraction in the next quarter. It, however, saw a V-shaped recovery on the back of a ₹20.97 trillion stimulus package and policy reforms announced in March 2020. A 0.5% growth was reported in the third quarter, followed by a 1.6% expansion in the fourth quarter ended 31 March 2021. The latest official estimates project India’s GDP growth at 9.2% in 2021-22.
The latest guidelines issued earlier this month have removed several hurdles in project management right from conceptualization of a project to land acquisition and award of a contract, said the second person, who works in a public sector company. The guidelines allow the award of a contract even on the basis of a single bid, provided the process is objective, non-restrictive, and the price quotes reflect the market value. “These guidelines are general in nature and have been framed after about two years of deliberations with various departments and agencies, including the Central Vigilance Commission and the Comptroller and Auditor General of India. It aims to execute public projects within the approved cost and time frame, without getting involved in unnecessary legal disputes," said the finance ministry official.
There are disputes and litigation with contractors while implementing projects. Instead of resorting to legal recourse, either in a court or an arbitration tribunal, both the parties should resolve disputes through discussion and mediation. Arbitration should be the last recourse. Unless a victory is certain, an appeal against the arbitration award should be avoided, the official said.
“It is perceived that at times appeals are made to postpone the issue and shift personal accountability. Such a casual approach has caused more harm to the exchequer because of huge compensation and interest costs and has also tarnished the image of the government," the official said.
