Lok Sabha Question No. 357 (STARRED), answered on 2016-12-09
Subject: Norms for Construction Sector
Ministry: FINANCE
Asked by: VINOD KUMAR BOIANAPALLI, OM BIRLA

## GOVERNMENT OF INDIA

## MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA STARRED QUESTION NO. 357

TO BE ANSWERED ON FRIDAY, THE 9TH DECEMBER, 2016 18th AGRAHAYANA, 1938 (SAKA)

## NORMS FOR CONSTRUCTION SECTOR

*357 SHRI B. VINOD KUMAR

SHRI OM BIRLA

Will the Minister of FINANCE be pleased to state:

- (a) the capital inflow in the construction sector during the last three years and the current year;
- (c) whether  the Government proposes to set up Conciliation Committees by Government bodies issuing public contracts to ensure speedy disposal of pending or new cases and if so, the details thereot;
- (6) whether the Government has introduced new arbitration norms to ease liquidity so a8 to restart stalled projects in the ailing construction sector and if the details thereof; SO,
- (d) whether the Government has eased the norms of foreign investments in the construction section and if s0, the details thereof; and
- (e) whether the said move has  registered a steady increases in the   foreign investment in the said sector and if the details thereof? SO,

ANSWER FINANCE MINISTER (SHRI ARUN JAITLEY)

- (a) to (e) A statement is laid on the Table of the House

## STATEMENT AS REFERRED TO IN REPLY TO PART (a) to (e) OF STARRED QUESTION NO 357 ON NORMS FOR CONSTRUCTION SECTOR ASKED BY SHRI B. VINOD KUMAR & SHRI OM BIRLA TO BE ANSWERED ON 09.12.2016 IN LOK SABHA

The FDI inflow in the Construction Development Sector years and the current year is stated as under: during

USS in million)

|   2013-2014 |        |   2015-2016 |   2016-2017 (April-September) |
|-------------|--------|-------------|-------------------------------|
|     1226.05 | 769.14 |      112.55 |                         61.85 |

The following instructions have been issued by Government to ease liquidity so as to restart stalled projects in the ailing construction sector:

- (ii) In case of claims where the PSU Department has challenged the Arbitral Award already announced, 75% of the award may be paid by the PSU Department to the contractor Concessionaire against Bank Guarantee without prejudice to the final order of the Court in the matter under challenge. The payment may be made into a designated Escrow Account with the stipulation that the amount so released will be used, first; for payment of lenders' dues; for completion of the project; and then; for completion of other projects of the same PSU Department; as mutually agreed / decided: balance remaining in the escrow account subsequent to settlement of lenders" dues and completion of projects of the PSU Department may be allowed to be used by the contractor concessionaire with the prior approval of the lead banker and Department PSU. Any
- In case of contractsl concessions where the process of arbitration was initiated under the pre-amended Arbitration Act; the PSUsl Departments may seek the consent of the contractors concessionaires to transfer the pending cases under the amended Arbitration Act; Wherever possible: The shift to amended Arbitration Act is expected to make the arbitration process more cost effective and help in settlement of the disputes in a timely manner:
- (iii) In case the subsequent court order requires refund of the money paid by a PSU / Department against a Bank Guarantee, the amount shall be refunded by the contractor concessionaire along with appropriate interest; The rate of interest on such refund amount may be decided by the PSU / Department keeping in view the cost of capital to the PSU Department or the rate of interest  provided for in the Contract Agreement or the rate of interest awarded under the Arbitral Award under challenge.

The Government has issued instructions for all PSUs/ Departments issuing public contracts to consider setting up Conciliation Committees/ Councils comprising of independent subject experts in order to ensure speedy disposal of pending or new cases: Recourse to such  conciliation may be open before, during or after  the Arbitration proceedings:

FDI policy on Construction Development permits 100% foreign investment under automatic route subject to certain conditions. FDI policy in this sector was last pragmatism in the policy so as to attract more foreign investment in the country not only in large infrastructure projects but also in held-up and smaller projects, the following amendments were introduced in the FDI policy for the sector: bring

- i Removal of conditions of area restriction of floor area of 20,000 sq. mtrs in construction development projects and minimum capitalization of US $ 5 million to be brought in within the period of six months of the commencement of business;
- ii\_ Exit and repatriation of foreign investment is now permitted after a lock-inperiod of three years. Transfer of stake from one non-resident to another nonresident; without repatriation of investment will not be subjected to any lock-in period or to any government approval;
- Exit is permitted at any time if project or trunk infrastructure is completed before the lock-in period;
- iv. 100% FDI under automatic route is   permitted operation and management of townships, mallsl shopping complexes and business centres;
- V Different phases of the construction development projects will be considered as separate projects for the purposes of FDI policy;
- Earning rentl income on lease of the property, as long as transaction does not result into transfer of property, will not amount to 'Real Estate Business';
- vii. Term 'transfer' has been defined for the purposes of FDI policy:

The measures the Government are with a view to increasing investment;, including foreign investment; in the construction sector: