Palike will seek bank loan to clear contractor dues

The state government has permitted the BBMP to obtain a bank loan of Rs 400 crore to clear its dues to contractors waiting for up to two years for payment.

The Bruhat Bengaluru Mahanagara Palike (BBMP) has come up with a novel scheme that allows the contractor to receive payment earlier by paying a bank interest rate. The Palike currently owes Rs 2,782 crore to contractors for work done in the years 2020-2021, 2021-2022, and 2022-2023.

DH was the first to report the civic body’s new proposal in a report published on September 5, titled ‘Cash-strapped BBMP banks on new plan to clear bills’. The state government’s consent will allow the BBMP to expedite the process of selecting the bank to roll out the scheme.

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The Urban Development Department (UDD) has issued an order instructing the BBMP to create a transparent mechanism by making the list of contractors who opted for the scheme available in the public domain. Payments will be cleared based on the seniority list.

According to the scheme, contractors can get the payment early by paying a certain interest to the bank upfront. The scheme will particularly benefit those who borrowed or took financial help from third parties to implement the work.

The BBMP has not been serious about timely payments to contractors due to overspending. This has led to a two-year delay in payments, which has also impacted the quality of work as contractors reduce their expenses to make a profit.