Separate financial institution for credit enhancement for infra, housing projects is also on the cards
The finance minister also reiterated the government’s five-year commitment of investing ₹100 trillion for infrastructure
The Centre will expedite pending payments to private infrastructure developers, many of whom are facing financial distress, due to ongoing arbitrations with the government.
Finance minister Nirmala Sitharaman said: “A lot of payments are getting delayed from government departments or central public sector enterprises (CPSEs). These delayed payments...will be monitored by the department of expenditure, and the performance will be reviewed by the cabinet secretariat with a dashboard in front of them. Except in cases under litigation, we will clear up all dues."
Sitharaman said that 75% of the payments under arbitration will be released immediately, while the remaining 25% will be paid pending the final order. This route to clearing unpaid dues was introduced by the Modi government, but the implementation had stopped in the intervening years.
“When arbitration payments reached stagnation, banks were risk-averse and didn’t want to cover (the private sector) for the delayed period after arbitration, even as the interest was mounting. We are making the necessary changes," the finance minister said.
“The finance secretary and secretary, department of expenditure, will work with the Reserve Bank of India and banks to ensure that this risk aversion and resulting multiplying interest will be addressed...Many cases after arbitration still waiting for their money will get their 75% straight away," Sitharaman said adding that so far nearly ₹30,000 crore of payments has already been cleared under this route.
The finance minister also reiterated the government’s five-year commitment of investing ₹100 trillion for infrastructure. “There is now an inter-ministerial task force with the department of economic affairs and finance to finalize the pipeline so that infra work will not get delayed further. This will accelerate capital expenditure and move the economy further."
“The finance minister has shown that the central theme of the government is the growth agenda and it is putting the infrastructure space in the Centre. So, the intent has come across. The rules regarding arbitration are a question of hygiene that is sorted out," Jagannarayan Padmanabhan, practice leader and director, transport and logistics, Crisil, said in an interview.
“Especially in roads, where we hope to see the release of money to developers where arbitration had happened, but pending final order. This shows that the government wants companies to continue investment in the infrastructure space."
Sitharaman also focused on the need for private developers to access low-cost capital and said that the government would take further action to deepen the market for long term bonds including for deepening markets for corporate bond repos, credit default swaps etc., with a specific focus on the infrastructure sector.
In order to improve access to long-term finance, Sitharaman said the government is also mooting a separate financial institution for credit enhancement for infrastructure and housing projects. This would enhance the flow of debt towards such projects, and the name of this organization would be announced in a few days, she added.
“The government has said in the past that it intends to invest ₹100 trillion in infrastructure. This is critical but everybody is keen to understand how this will translate on the ground. Setting up the task force to take this forward is an important step. Regarding creating the organization for credit enhancement, details are yet to emerge on the contours of the organization," said Padmanabhan.