The Department of Economic Affairs, Ministry of Finance has advised the Ministry of Housing & Urban Affairs (MoHUA) that the impact of the proposed amendment be considered on the rights of lenders as well as concessionaires under other laws.
The Department of Economic Affairs views that the proposed amendments could impact other conditions of the Metro Act and, further, the amendments could also impact the lenders’ view of the metro projects, as the lenders could be denied recourse to the revenue streams of such projects.
The Department of Expenditure (Ministry of Finance) too has sought safeguards so as to protect the interest of Government of India in case dues were owed by Metros to the Government of India itself, which would be rendered irrecoverable.
MoHUA had sought comments from various Central ministries on the proposed amendment to the Metro Act.
The proposed amendment would certainly discourage international as well as domestic funding agencies, apart from suppliers/contractors, from participation in the Indian infrastructure sector. The amendment raises more concerns than it seeks to address.
The single point agenda of the Ministry of Housing & Urban Affairs (MoHUA) is to ring fence Metro Rail assets from execution proceedings, pursuant to arbitral awards and civil court decrees, without caring about the after-effects of such a move.
Even Central ministries are not on the same page as MoHUA.
Had MoHUA simultaneously suggested some way out for decree holders to be paid up, either by the Government of India itself or through any other feasible alternative, that would have prevented causing so much concern. The proposed amendment simply prevents recourse for decree holders, even in the case of decrees passed by the Supreme Court of India.
Even government companies (like IRCON, NBCC) which participate in tenders floated by Metro Rail companies would be adversely impacted. Most public financial institutions and banks would also be adversely impacted, as they would not be able to recover their funding to metro projects, if decrees against metro rail companies are rendered unenforceable.
The amendment to the Metro Act would severely hit India’s ranking in the ease of doing business.
The proposed amendment does not prima facie pass the test of constitutionality either, as per the Union Law Ministry.
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