NEW DELHI: The government has announced a package of measures to revive the construction sector, putting in place a mechanism to release funds stuck in arbitration awards to revive stalled projects, and promised a scheme to address stressed loans in the sector.The Union Cabinet on Wednesday also gave post facto approval to the June 20 foreign direct investment reforms that opened food sector to 100 per cent foreign investment and raised the limit for civil aviation and defence to 100 per cent among others.Shares of Hindustan Construction Company , Gammon India, and IVRCL that stand to gain the most rallied 10 per cent-20 per cent after the announcement. These companies have significant exposure to the government sector.Under the new arrangement approved by the Cabinet Committee on Economic Affairs, government agencies would pay 75 per cent of the arbitral award amount to an escrow account against margin free bank guarantee in those cases where the award is challenged.The disputes will also be shifted to the new faster arbitration process put in place.The new regime, proposed by the NITI Aayog, will ensure that projects are not stalled and the developer and its other projects do not suffer because of want of funds while the dispute is resolved.Over Rs 70,000 crore is tied up in arbitration. Resolution of cases can take more than seven years on an average."Today, one of the key problems is that there are a large number of awards where payments have not been made. Consequently the contractors have not been able to pay the bank and it has adversely impacted the balance sheets of the companies as well as the banks. And the projects have come to a halt," said Finance Minister Arun Jaitley said at a press briefing after the Cabinet meeting.The 75 per cent amount released into an escrow account will have to be spent by the contractor in completing the project and in discharging the bank and financial institutions’ dues, according to the rules.The move will help construction companies complete stranded infrastructure projects while lenders will see their loans serviced.A report commissioned by the CII indicates points out pending claims from government bodies are key factor behind burgeoning debt of construction companies, accounting for about 150 per cent of the debt.FM said wherever there are disputes pending between public bodies and construction contractors under the old arbitration act, which was time consuming, there will be an option, with consent, to shift to the new arbitration laws where there is a procedure for a cheaper and quicker arbitration process.These initiatives are expected to help in improving the liquidity in the short run and reform the contracting regime in the long run, the government said in a statement.Gaurav Karnik, partner and leader-real estate & infrastructure at EY, said this will enable contractors to service their obligations, which would help reduce bank NPAs."At the same time, the contractor would be able to restart the project, which will be good for the infrastructure sector on the whole. All these disputes are a key issue for the industry as litigation can go on for years and stall projects," he said."This is a positive announcement and will hopefully lead to faster completion of pending projects. This will also help banks reduce their outstandings," said Anshuman Magazine, chairman, India and South East Asia at property consultancy CBRE. "The conciliation board in new projects will also ensure issues are resolved early."Going forward, in all new contracts relating to construction, there will be a provision for a conciliation board, which will comprise of independent subject experts.Other measures under consideration are changes to bid documents and model contracts, and increased use of conciliation. NITI Aayog will also examine the idea of creating "claim take out funds" financed by private sector investors, while the Department of Financial Services will examine a suitable scheme for addressing stressed bank loans in the construction sector."This is done for the reason that when commercial circumstances change and public servants are reluctant to participate in the renegotiation, there will be a contractual mechanism under which those terms could be renegotiated without bringing the projects to a standstill," Jaitley explained.Also, in contracts which are entered into by public authorities and bodies, the item rate contracts would be replaced by a turnkey contract and a model draft turnkey contract proposal will be circulated soon.With these stalled projects getting restarted, there will also be a multiplier effect on sectors with linkages to construction such as cement, steel etc and also labour.