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Q. Government's move on stalled infra projects: Comment on recent move by government to kick start stalled infrastructure projects in India.
Sep 07, 2016 Related to : GS Paper-3

Ans :

Introduction-

Recently government has decided to release funds for government-sponsored construction projects, which have been stalled for long time due to various reasons. This will revive the construction and it will kick start sagging private investment in government-sponsored construction projects, where projects are stalled due to 75% of funds are locked due contractual disputes.

Issues in Government sponsored construction projects-

  • Currently huge numbers of government sponsored construction projects through PPP mode are derailed and construction process is stalled due to various disputes and reasons.
  • There exists various construction related disputes between government and private parties. The mains reasons are flawed contracts, poor cash flows, delayed clearances, high debt etc.
  • As a result government parties not releasing funds for alleged violation of contract terms, which results into stalemate in construction work. And It takes an average of about seven years to settle the issues.

How recent move benefits-

  • To release funds in government sponsored construction projects will push construction works of stalled infrastructure projects.
  • It will revive construction and real estate sectors by easing of rules for quicker settlement of disputes. The disputes themselves will be settled under a new set of arbitration rules which are expected to reduce delays.
  • Similarly it will bring down the stress on the public sector banks to a large extent. This step could help both project developers and banks to move on.

Suggestions-

  • For long term solution government must address core issues like poorly worked out contracts, clearance issues etc.
  • Similarly disputes arising out of tax ambiguities and poorly drafted agreements, be it timelines or quality specifications must be addressed effectively.
  • To maintain environmental and safety norms, The Real Estate Act 2016 should be enforced in all earnestness so that processes are smooth and transparent for all stakeholders.

Conclusion-

Being developing country, stalled infrastructure projects hampers the growth of the nation.  These stalemate are due to flawed contracts, delay in environment clearances etc. results into not releasing of funds by government agencies. In this background recent move of government is step in right direction to complete stalled infrastructure projects. For a long term perspective government must find out a comprehensive solution to promote investment in infrastructure projects.


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