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Infra sector companies need renegotiation of EPC contracts amid rise in enter price; lenders oppose

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Kolkata: While a number of personal firms within the infrastructure area are elevating demand for renegotiation of EPC contracts amid rise in enter prices, the World Bank in addition to the nation’s largest industrial lender State Bank of India have voiced their opposition.

Concerns have additionally been raised at completely different fora by different lenders in regards to the probably influence on the already pressured asset high quality and the urge for food for lending to core tasks if current contracts should not honoured.

“The contract is sacrosanct. It’s the contract against which we provide finance,” State Bank of India normal supervisor for mission finance Sanjay Kumar Singh mentioned Friday. He mentioned that banks have been taking this up with the federal government at completely different platforms saying that re-negotiation could grow to be a problem for them.

Private firms particularly within the engineering procurement and building (EPC) area are requesting their authorities counterparts to revise their current contracts as enter costs like metal and cement rose sharply following the Covid-19 pandemic-led disruptions.

“A contract cannot willy-nilly be negotiated,” mentioned Junaid Ahmad, World Bank nation director India, whilst he acknowledged a necessity for the overview of the mission phrases and situations in a new-normal world after the pandemic. The World Bank helps infrastructure growth in states by means of finance and advisory.

He mentioned that any contract ought to have a mechanism and situation beneath which re-contracting may be attainable throughout shocks reminiscent of pandemic.

“We are in the world of shocks. So if we want to create a corporate structure of service delivery, the ability to renegotiate a contract, because the world has changed unexpectedly, has to be put in there. But it has to be absolutely institutionalised and not ad hoc,” Ahmad mentioned.

Both Singh and Ahmad have been speaking at an occasion organised by Bengal Chamber of Commerce & Industry.

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