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Infrastructure Sector Reforms under Atmanirbhar Bharat 3.0

- November 2020 | By Vibhi Dixit

As a part of the third stimulus and reform package- Atmanirbhar Bharat 3.0 announced on November 12, 2020, the Finance Minister, Smt. Nirmala Sitharaman outlined reforms to be introduced in the infrastructure and construction sector to facilitate the Ease of Doing Business in the sector.
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As a means to battle the onslaught of the Covid-19 pandemic on the Indian economy, the Indian government has been introducing a series of reforms through the clarion call of making India ‘self-reliant’ under the Atmanirbhar Bharat program. Through this program spanning across seven sectors, the government has introduced several economic measures to revitalize and enhance the growth trajectory of the Indian economy.
 
As a part of the third such stimulus and reform package- Atmanirbhar Bharat 3.0 announced on November 12, 2020, the Finance Minister, Smt. Nirmala Sitharaman outlined reforms to be introduced in the infrastructure and construction sector to facilitate the Ease of Doing Business in the sector. She highlighted the centrality of the infrastructure sector in the Indian economy, and underlined the necessity of enabling contractors enter the sector easily.
 
She announced the ‘relaxation of the Earnest Money Deposit (EMD), and Performance Security on government tenders’ to give relief to contractors and free their working capital which otherwise stays locked up during the tender awarding process. This relaxation reduces the Performance Security from 5-10% to 3%, and has been extended to all ongoing contracts that are free of disputes, and to Public Sector Enterprises. Bidders will now only have to submit a Bid Security Declaration in place of EMDs. These relaxations will be in force until 31.12.2021. These relaxations are being seen a way to reduce the burden of paying bank guarantees on the contractors, and providing them more ease to undertake infrastructure projects. 
 
This is a welcome move given the challenges that the pandemic has posed for the infrastructure contractors in terms of low levels of cash reserves leading to a liquidity crunch, supply chain disruption, and delays in project construction. These reforms will rectify these issues by augmenting the financial capability of contractors and provide relief in working capital.
 
 
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