Covid-19: How to reset infra sector after lockdown

The 21-day national lockdown has impacted all industries and businesses. The unprecedented crisis is leading to a global economic recession. The country is looking at the Central government for economic stimulus and packages. Already, the government and Reserve Bank had announced a slew of interim measures. Moratorium for the loan and reduction in interest rate on term loans are the right initial measures. Now, more has to be done by respective departments, authorities and ministries.

After the agricultural sector, infrastructure industry is contributing the highest 9% to the GDP. So naturally in this crisis more has to be done to invigorate the infrastructure sector. Also, it is the sector where the government can directly invest or pump in money. To stabilise the economic system, the government needs to circulate the money to the people from all classes in the country. Infra business is the most suitable for it, which includes unorganised daily wagers to high-end executives. Since it is a huge human resource and migrant labour-oriented industry, it will take at least six months for it to gain momentum from the date of ending the lockdown. The migrant labourers have returned to their hometowns already. The remaining ones will go back once the lockdown is lifted. In case, the public transport doesn’t start functioning, they won’t be able to return. So on the next day of lifting the lockdown itself, the switch on the production cannot be started at the infra industry.

Most of the infra and construction companies are already in a bad shape due to wrong policies and stringent banking regulations. As this epidemic badly affected the people, the infrastructure companies will die if sufficient remedies are not administered. Now, increasing the cash-flow to the market by the ministry is the only solution. Actions are required more than fancy announcements. The main government bodies driving these infra projects are MoHUA, MoRTH, NHAI, NHIDCL, NBCC, CPWD, GAIL, NTPC, Port authorities and other oil companies. They need to finish the tendering process as fast as possible, where all the clearances are available. Also there is a need to speed up the existing projects.

Following are a few suggestions to save infrastructure companies and industries:

  • Declare this pandemic as a force majeure event and issue the certificate so that there will be no burden of proof on contracting companies.
  • Award better cash flow projects like maintenance, and item rate contracts, of short duration and relax on bid capacity caps.
  • Appoint regional-wise impact assessment committees. The committee should have expert members, who should team up with government officers and outside experts. There are many regions, where the monsoon season is about to start, like Konkan region and North-East. These weather forecasts need to be considered.
  • If the project completion takes more than one year, there needs to be a six months moratorium for the repayment of all types of advances including mobilisation advance. In case of actual project completion or approved extension of time (EoT) takes two years, there needs to be a one-year moratorium. This should be put into action within 30 days.
  • The interest for the advances should be waived off if the project completion takes less than a year. Rate of interest should be reduced if the project completion takes more than one year.
  • Need to rearrange the payment schedules in EPC projects enabling the cash flow to be maximum. Amend the contract accordingly within 30 days.
  • Last but most important is constitute region-wise conciliatory committee and settle all disputes till date within a period of 100 days. This will reduce the burden on government and offer a big relief to infra company.

A moratorium of six months for both employer and employee contribution to EPF, will be a big support for companies since it is a statutory requirement. If government bears 10% of the daily direct labour engagement charges to companies or even directly to labours account it is also a better option to create more employment and speeding up the revival. In turn 50% of the annual CSR fund should be deposited in the PM Cares fund, which should be made mandatory through an ordinance.

(Author is a techno legal expert and management consultant)