Indian Railways Implements New Payment Policy for Contractors to Mitigate Risk

The new policy is to pay private contractors within 30 days of invoicing, with the government paying interest if the deadline is missed.

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NEW DELHI (Metro Rail News): Union Minister Ashwini Vaishnaw announced on Tuesday said that the Indian Railways has implemented a new policy of paying private contractors within 30 days of invoicing, with the government paying interest if the deadline is missed. This move aims to mitigate the “biggest risk” faced by contractors in government contracts. Vaishnaw stated that Prime Minister Narendra Modi had called for the removal of the most significant risk in government contracts, which they found to be payment risk.

This provision has been implemented in all new tenders and government-funded projects. For years, the government has used a similar provision in contracts for government-funded highway projects taken up by the highways ministry, where interest charged on delayed payments is 3% higher than the bank rate. Vaishnaw remarked that since 2014, the government has focused more on railways, with this emphasis resulting in increased cargo transport by rail after decades.

The railways has identified 70 major bottlenecks and aim to address them within the next two years. To meet the need, the national transporter has ordered 85,000 wagons and 1,200 locomotives, with the aim of adding 1,000 locomotives annually. Vaishnaw expects that by increasing the railways’ carrying capacity, logistics costs will decrease significantly.

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