To boost construction, Centre reduces performance security on contracts

In a bid to boost construction and infrastructure development projects, the Central government on Thursday relaxed the regulations on earnest money deposit (EMD) and performance security on government tenders.

Union Finance Minister Nirmala Sitharaman announced that performance security on contracts is being reduced to three per cent from 5-10 per cent.

EMD will not be required for tenders and it will be replaced by bid security declaration.

The relaxation will be available to contractors for one full year till December 31, 2021.

Sitharaman said the measure would give relief to contractors by avoiding locking up of capital and the cost of bank guarantees.

With this contractors could focus more on completion of projects in time as adequate capital would be available to complete the work. The pace of awarding projects would also increase.

On ‘Atmanirbhar Bharat Abhiyan 3.0’, a Finance Ministry statement said the relaxation would be available on ongoing contracts which are free from disputes.

To expand the scope of the scheme, public sector enterprises will also adopt it for their own project awards. The state governments would be advised to adopt the scheme to support infrastructure development.