Centre exploring bill discounting via RBI to bail out road builders


The Union road transport and highways ministry is exploring, with the Reserve Bank of India, the introduction of a bill discounting facility on the lines of the Kerala government to bail out builders constructing roads, according to top executives of the Builders’ Association of India (BAI).

Road transport and highways minister Nitin Gadkari has promised to work on alternatives to bank guarantees and arrange construction equipment and machinery from manufacturers on lease basis with the government extending guarantees, said BAI vice-president K Sriram.

Sriram told ET that the minister, at the recently held Excon meeting of BAI, assured builders that tenders worth around Rs 2.5 lakh crore for road projects would be floated and awarded before the end of this fiscal.


Responding to the problems builders were facing pertaining to bank guarantees worth thousands of crores stuck with the government and the absence of fresh bank guarantees from banks, the minister had informed builders that alternatives to bank guarantees were currently being worked out.

“Instead of bank guarantees, a plan to make insurance companies offer policies for the projects was being worked out, which the minister said will be implemented before the financial year,” said Sriram.

“This is going to be a game changer for the industry where the bank guarantees will be done away with. The minister also said the government has already begun talks with the insurance companies on this issue.”

On the issue of pending payments to builders running into thousands of crores that were affecting their financials, the minister assured that a bill discounting facility through RBI would be introduced shortly at the national and state level on the lines of Kerala. “The government of Kerala had introduced a bill discounting system wherein any bill of the state government will be discounted by three banks. 90% of the bill amount is given immediately to the builders, with the government and builders bearing 6% interest each.” Sriram said Gadkari had informed builders that a similar scheme was being worked out through RBI to be extended across the country to be honoured within the budgetary limits of states and the centre.

Another assurance the minister extended in the backdrop of crisis in NBFC sector was to arrange construction equipment and machinery from manufacturers on a lease basis with central and state governments extending guarantees. “The amounts will be deducted from the bills of the builders to be paid to the manufacturers.

The minister said the modalities are currently being worked out on this gear leasing scheme.”

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