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The Fate of Infra Firms is changing over Blocked Bills

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Infrastructure development firms are currently facing a tough time, when they have over Rs.15,000 Crore locked up in the ongoing highway projects. The reason of such lock up is the lack on the part of officials, who are reluctant to approve even routine cost escalations for fear of being pulled up by the auditor.

Issues Faced by Infra Firms over Blocked Bills

i) Bureaucracy – It was reported that few government officers appear to be willing to take a decision in such cases, but are unable to do so due to high bureaucracy. The money has got stuck due to the negligence of the officers passing the bill and signing off the payment, as none of them are ready to take the responsibility for signing off on excess payments despite being the fact that the payments are perfectly legitimate.

ii) No New Projects – The pending payments or the logjam on additional payments for extra costs incurred has increased to such a level, that currently building roads etc. are not seen as viable opportunity by many contractors. This logjam has resulted in severely stretching the infrastructure builders’ balance sheets thus cramping their ability to look at new projects. It was confirmed by the authority of National Highway Builders Federation that a total payment of over Rs. 15,000 Crore for cost escalations, royalties, deviations and variations in projects were stuck in arbitration and litigation in courts. These lock out of the payment is one of the key reasons that no fresh projects are eliciting interest from developers.

iii) Bank Finances – The unwillingness of the banks to finance a project unless all requisite clearances are in place. In addition to this, the worst came when the banks started to disregard the guarantees, extended by the National Highways Authority of India (NHAI), while considering project loans.

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iv) Technical Surveys – Currently under the governmental policy of developing such infrastructure projects, the developers have to deliver the roads in a time-bound manner under the contracts. Also they are allowed escalations in cost or variations that arise due to unanticipated reasons. Further the payment for such additional costs are, however, approved after technical surveys. Even after the completion of technical approval, in many cases, the payments are yet to be cleared. This has resulted in heavy losses for the contractors/developers. The contracts prescribe the route of arbitration for resolving disputes; developers are now being asked to move to the arbitrators so as to get the payment released.

v) Audit – Despite knowing the fact that these payments are totally genuine, people are not ready to clear the same on the fear of going to jail or being pulled up by CAG.

It was admitted by the road secretary AK Upadhyay, that due to the fear of being pulled by the auditor the officials are reluctant on releasing payment for the justifies and approved bills. He says that for officials, “If something goes right, no one will care, but if one faulty step is taken they will be pulled under the scanner of auditor which is a negative mark on one’s own career”.

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People who are serving NHAI only for term of five years are worried about their own future, being affected by any potential audit questions or vigilance inquiries which may come due to their actions on any such decision of clearing the payments of the developer. Thus it is a matter of deep regret, that the developers of national infrastructure are not getting their dues cleared, which is preventing the development of other projects in future. Currently the finance ministries and road ministries have been urged to help resolve the deadlock.

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Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

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