Private industry had, for long, cited one issue which had worsened the impact of current economic slowdown. Government contractors, engaged with roads and other infrastructure projects, have been seeking clearance of their dues right from the first term of the Narendra Modi government.
After this years' Union budget too, India Inc had voiced its concern over unpaid dues from government job and supply contracts. The National Highways Authority of India (NHAI) alone has deferred on payments of more than Rs 60,000 crore on highway constructions.
"Unpaid dues on government contracts alone have clogged money supply in the economy. We request you to take note and set up a mechanism to monitor payment of government contracts," Vinayak Chatterjee, chairman, Feedback Infra, had told former economic affairs secretary Subhash Chandra Garg and current secretary Atanu Chakraborty, at a CII post-budget meeting with finance ministry officials.
Finally, two months later, the government is concerned and wants to do its bit to resolve the situation. On Thursday and Friday, expenditure secretary Girish Chandra Murmu and economic affairs secretary Chakraborty met chairpersons of central public sector enterprises (CPSEs) and top officials of the roads, shipping and railways ministries at North Block.
"This extra effort is being taken so that government is able to pump in some liquidity to boost demand," the economic affairs secretary said, after the review meeting over payment of dues on large infrastructure projects at the finance ministry.
According to finance ministry spokespersons, chairpersons of all navratna and maharatna public sector enterprises and financial advisors of infrastructure ministries too attended the meeting.
Close to 150 infrastructure companies, owing banks more than Rs 400,000 cr of bad debts, are facing bankruptcy resolution under Insolvency and Bankruptcy Code (IBC) procedures. The IIFL crisis and RBI regulation on debt-stressed banks had aggregated the funding crisis of large infrastructure projects.
During the meeting, the two finance ministry secretaries asked CPSEs and infrastructure ministries to adhere to their capital expenditure plan and accelerate their investment activities.
Special stress was also laid on monitoring release of payments for procurement and other contracts without delay to infuse liquidity in a time bound manner. Also, resolution of outstanding payments, which may have been held up on account of disputes, were asked to be expedited.
The ministry of finance would also constantly monitor the progress of large infrastructure projects of these ministries as well as CPSEs. Further follow up meetings on these capital spends are also likely.
A dashboard for enabling ministries to upload figures on periodic basis will also be developed, a finance ministry statement said.
The industry estimates that there are more than enough pending payments of the government to usher in a better festive season market this year. "This can amount to release of more than Rs 300,000 crore in dues from the government. This should be sufficient as a short term booster to the consumer durable, infrastructure and automobile industries," said Chandrajit Bannerjee, CII director general.
Industry bodies are also upbeat on the concrete measure to speed up payment of vendors of large infrastructure projects, and welcomed the move. "With a mix of both broader measures and sector specific interventions, we hope that the Indian economy and industry will come out of this weak patch soon,” said Sandip Somany, president, FICCI.
The finance ministry is devising a multi-pronged approach for providing boost to the economy. It is attempting to reverse the slowdown both sector wise and in terms of credit availability. Merger of some public sector banks and upfront capital infusion of Rs. 70,000 crore were announced recently. Distress in the auto sector has also been addressed through a package of measures earlier.
