”COVID-19 BE DECLARED AS A FORCE MAJEURE” for Infra projects and for automatic expension for running projects

Dwarka Parichay Newsdesk

The Consulting Engineers Association of India (CEAI), the apex body of engineering professionals in the country, in a letter to the Union Minister of Finance Ms Nirmala Sithraman has urged the government to declare COVID -19 as a Force Majeure event for all infrastructure  consultancy contracts under implementation as both Parties, neither the Client nor the  consulting companies are able to meet contractual performance in  ongoing projects.

Force Majeure’ clause is a contractual provision that addresses circumstances in which contractual performance becomes im[possible o impractical due to events that could not be foreseen , and are not within party’s  control. Consulting engineers provide consultancy to government in major infrastructure projects including roads, airports, bridges, railways and ports.

“The total lock-down, though was inevitable, has major implications on companies, particularly the Consulting companies, which have a small capital base.  In present lockdown conditions, it will be difficult for these consulting companies to meet contractual performance for Consultancy Contracts under implementation or under service including  preparation of Feasibility Report and Detailed Project Report (DPR), Detailed Engineering, Project Management by an  Authority Engineer” said Said Mr. K.K.Kapila, Past President, CEAI and Chairman, Infrastructure Committee.

“The running contracts expiring during the lock-down period should be given an automatic extension of time and there should be a waiver for Submission or  extension of Bank Guarantees as provided for in the Contracts, during this lock down period.  Provision for payments need to be made for deployment during extended period along with the overheads.” Said Mr. Kapila

“The government should release 90% payments of the already submitted Invoice amount by the Consulting firms, as per valid payment clause in the Contract, prior to scrutiny of Invoice by the department staff. The balance payment may be released after the due process. This will enable Consultants to pay to their staff and to the support organizations that work for them as well as to large number of informal persons whose services are availed from time to time.” Said Mr. K.K.Kapila,

“For redressal of immediate financial crisis, the Income Tax refunds for FY 2016-17 and 2017-18 may be released on top priority across the spectrum, particularly to the Engineering Consultancy fraternity, who operate on a small capital base. The clearances of these outstanding payments would be of significant bearing to the Engineering Consultancy Industry and would instill hope and confidence to carry on post COVID 19 lock down towards business continuity. “ said Mr Kapila.

“As per present process in vogue, GST is required to be paid by consulting firms within 30 days of raising the invoice while the payments from the Clients, mostly government, are received anywhere between 4-6 months or even beyond (as late as a year). This puts an enormous pressure on our cash flows. As such, an urgent correction is required in GST dispensation, which could be explored by the GST Council to give reprieve to the Consulting Fraternity/Service Sector. “ said Mr Kapila.

“CEAI suggests that the GST be  paid by the Service Receiver (Client) directly to the Authorities, on similar lines as the TDS. Alternatively, the Service Provider could be allowed to deposit the GST within 30 days of receipt of payments from the Client – which was the practice in vogue, prior to 2012, when the present dispensation was introduced. If, however, for any reason the above two suggestions do not find favor with the Government of India, then the Service Provider may be given a timeline of 120-180 days from the raising of invoice to deposit the GST, in line with receipt of payments from the Client. The Client may be mandated to make the payment along with the GST to the Service Provider, with a copy to the concerned GST office.” Mr Kapila added.

“For Government Projects/Contracts, digital signature on documents to be made valid for all proposals, contracts, etc., and physical copies or other documents shouldn’t be demanded for.  To propagate and popularize digital signatures concept, an online payment process with access should be provided for the Government officials for dynamic and smooth processing of projects and contracts.  This will positively impact and enhance ability of the companies to work on government projects and contracts.” He added.

CEAI also urged the Government to provide clear directives to the Insurance companies  to cover ‘’home office inputs’’ under the definition of workplace to ensure availability of Professional Indemnity insurance coverage to the staff of Consulting Organization’s who operate from home.

CEAI also urged the Government to consider re-introducing the concept of Omnibus BGs as against providing individual BG against professional indemnity, against each Contract. CEAI suggested that Omnibus BGs should be allowed to be provided Client-wise for specified values, depending on the quantum of work each Consultant has with that particular Client.

Source: V K Arora