MoRTH orders release of ₹8,000-cr to road contractors

The highways ministry has issued orders to release ₹8,000 crore, which is the retention money of contractors in proportion to the work done, and also for making changes to enable monthly payments, among other Covid-19 relief measures for improving liquidity with highway contractors and concessionaires. In the release orders, the ministry had allowed extension of project timelines between three to six month and payments to subcontractors via an escrow account, besides giving a relaxation in Schedule H that will enable monthly payments to contractors for the work done. The extension of project timeline, however, has been done without any compensation to contractors for cost of idling and delays in execution of projects. So far, the extension is without cost, but there may be further clarification on this if contractors raise the issue, said official sources, adding that it is difficult to assess the claims on idling and delays in construction; these could lead to arbitration in the future. Retention money (which is part of the performance security till construction period), is recommended to be released in proportion to the work already executed in accordance with the contract specification and further retention money from the period from three months up to six months may not be deducted from the bills raised by the contractor. The retention money to be released in case of contracts on engineering, procurement and construction (EPC) basis could be between ₹3,000 crore and ₹4,000 crore and in case of projects on hybrid-annuity mode, it could be around ₹700 crore. With changes in Schedule H, a sum of ₹3,000 crore is likely to be released. Generally, agencies like the National Highways Authority of India (NHAI) do not establish escrow accounts for EPC contracts. Following the guidelines, an escrow account between NHAI, main contractor and subcontractor could be made, with the subcontractor bearing the withdrawal rights. This will ensure that the smaller players in the sector are taken care of. For all national highway tolling contracts, loss in collection of toll fee will be compensated as per the contract conditions, the guidelines said.