The BMC has decided to return half of the cash deposits to contractors to help them deal with the cash crunch due to the pandemic. For the remaining 50 per cent, contractors can replace the cash deposits with bank guarantees. This will be applicable to only those contractors who have completed 50 per cent of their work. Also, those contractors who are facing probes for shoddy or substandard work will not be eligible for this scheme.
The BMC has cash deposits and bank guarantee of at least Rs 500 crore from major contractors who work in departments like roads, bridges, water supply,
“This new scheme is in line with the circulars of the central and state government. This will help contractors generate some liquidity since they are facing a cash crunch. By taking back the cash deposit, they can use the money to get work done and instead give us a bank guarantee. This will reduce the cash load on them,” said P Velrasu, Additional Municipal Commissioner, Projects.
According to BMC officials, contractors pay hefty cash deposits to the BMC if they are given work orders for
In May this year, the
Contractors have said that even the bank guarantee must be waived since the smaller contractors bear higher cost for bank guarantee as financial institutions seek higher collateral. “We will get 50 per cent of the deposits back and to take the remaining 50 per cent we will have to replace the cash deposits with a bank guarantee. The banks charge a lot for giving bank guarantees and take three times in collateral. So we have requested that the bank guarantee must be waived, if more than 50 per cent of the work is complete,” said a contractor, who refused to be named. Velrasu said waiving the bank guarantee was under consideration. “Contractors have demanded that the bank guarantee should be waived. This is under consideration. We have also given a 6 months extension for all projects,” Velrasu said.