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Explained: Will ‘Samadhan-se-vikas’ help recover hundreds of crores builders owe?

The Indian Express explains why the government has now introduced a one-time settlement scheme for recovery of EDC, and what it aims to achieve with it.

Written by Varinder Bhatia | Updated: July 8, 2020 2:04:22 pm
Haryana, Samadhan-se-vikas, Samadhan-se-vikas haryana, haryana infrastructure development, indian express The scheme will be applicable to the full outstanding EDC including interest as well as penal interest. (File Photo)

Several real estate giants in Haryana have not deposited hundreds of crores of rupees worth mandatory External Development Charges (EDC) and Infrastructural Development Charges (IDC) for the residential and commercial colonies they have built across Haryana. In a bid to recover this massive sum — which the government further uses for infrastructure development — Haryana had been issuing notices to such defaulters. Over 350 such real estate developers are already on notice.

The Indian Express explains why the government has now introduced a one-time settlement scheme for recovery of EDC, and what it aims to achieve with it:

How much do real estate developers owe the state government towards EDC/ IDC?

Official documents show an outstanding EDC/IDC worth nearly Rs 10,000 crore. The documents also reveal that in certain cases, the bank guarantee for several developers is nil, while their outstanding EDC is in crores. The outstanding amount continues to get accumulated over the years. Colony licenses, for which these developers owe money to the government, were issued by the Town and Country Planning Department between 2007 till December 31, 2018.

What are EDC and IDC?

The developer is supposed to pay External Development Charges (EDC) to civic authorities for maintenance of civic amenities within the periphery of the developed project including construction of roads, water and electricity supply, landscaping, maintenance of drainage and sewage systems, waste management etc. The EDC is decided by the civic authorities. In many cases, the developer collects it from home buyers, but does not pay it to civic authorities. Infrastructure Development Charges (IDC) is collected by the state government for development of major infrastructure projects across the state. These funds are utilised for socio-economic growth including construction of highways, bridges, and transportation network etc.

Where are major defaulters located?

A large number of the colony licenses on which the developers have defaulted are for commercial and residential colonies developed in Gurgaon, Faridabad, Sonepat and Panchkula, while a few are in Rohtak, Karnal, Jhajjar, Bahadurgarh and Yamunanagar.

What does the rules say?

As per terms and conditions of the LC-IV and the bilateral agreement executed at the time of issuance of license in terms of Rule 11 of Haryana Development and Regulation of Urban Areas Rules, 1976, a licensee has to pay the EDC as per schedule of payment. If the licensee neither deposits the EDC and/nor IDC as per the terms and conditions of the agreement nor avails the EDC Reschedulement Policy, a showcause notice in the form of a public notice is issued by the Town and Country Planning Department warning such defaulters of further action of revocation/encashment of BG (bank guarantee) on account of non-payment of EDC/IDC.

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What is the new one-time settlement policy?

The new scheme is called ‘Samadhan se Vikas’. It is modeled on the central scheme of ‘Vivad se Vishwas-2020’. The scheme will be applicable to the full outstanding EDC including interest as well as penal interest. In case a coloniser deposits 100 per cent of the outstanding principal amount against EDC as well as 25 per cent of the accumulated interest and penal interest within six months from the date of notification of this scheme, the balance 75 per cent of the accumulated interest and penal interest shall be waived off.

In case a coloniser deposits at least 50 per cent of the outstanding principal amount against EDC as well as 50 per cent of the accumulated interest and penal interest, within six months from the date of notification of this scheme, the balance 50 per cent of the accumulated interest and penal interest shall be waived off.

The remaining 50 per cent of outstanding principal amount shall be recoverable in four six-monthly installments along with interest at the rate of 8 percent per annum on the delayed period and an additional 2 percent interest per annum on the default period. The first six months period for deposit of first installment shall start from the date of deposit of 50 per cent principal plus 50 per cent interest and penal interest component.

In case the coloniser does not clear alle EDC dues within the said two-year period, the waiver of balance 50 per cent of the accumulated interest and penal interest will stand annulled and the original EDC schedule shall come into play. However, in case any amount of the 50 per cent outstanding principal amount alongwith interest is not deposited within the prescribed two-year period, the coloniser will lose all benefits under this policy and the original EDC schedule applicable before the applicability of present policy shall stand restored and all payments received shall be considered to have been paid against the original EDC schedule.

Was such an offer made in the past too?

Yes, in September 2018, the state government had offered developers the option of opting for an EDC Reschedulement Policy, 2018, whereby they were given an option to clear their outstanding “in parts”. The government had allowed developers to opt for the policy and make 20 per cent down payment of the outstanding EDC/IDC and pay the balance amount in eight half-yearly installments along with the interest.

Another option given under the policy was that in case a developer wanted to pay 15 per cent of the outstanding EDC/IDC, he/she would be allowed to pay the balance outstanding amount in five half-yearly installments with interest. However, not many defaulters availed it. Thus, the government initiated action and began forfeiting their bank guarantees.

What is the government’s stand on bank guarantees now?

Citing an old Punjab and Haryana High Court verdict, the Town and Country Planning department on June 16 ordered that the state government shall not insist on payment of enhanced EDC from the colonisers for the time being. An order issued by director (TCPD) read, “Now, the matter regarding release of bank guarantees of enhanced EDC w.r.t. licences issued prior to 14.07.2011 has been deliberated and it has been observed that in most of such cases, the licensees are not extending the validity of BGs and the department cannot invoke these bank guarantees. On invocation of bank guarantee, the amount encashed towards enhanced EDC will be treated as recovery of enhanced EDC and the same will amount to contempt of court”.

The order added, “In view of the facts stated above, a uniform decision has been taken that the BGs submitted on account of enhanced EDC against all the licences w.r.t. licences issued prior to 14.07.2011 in the state may be considered for release subject to the following conditions: 1) Original EDC/IDC alongwith interest has been fully paid by the licensee in respect of all the licenses granted in the name of the same licensee/developer by the department. 2) In case, if any amount of EDC is outstanding in any other license or in the same license then, after invoking the BG, the amount shall be adjusted towards outstanding EDC/IDC or as down payment of EDC re-schedulement policy and excess amount of Bank Guarantee will be released. 3) Submission of undertaking by the licensee that they shall comply with final order of High Court in CWP No. 5835 of 2013 titled as Balwan Singh and others vs State of Haryana and deposit the BG required as per provisions of the Act, 1975”.

How much EDC has been recovered in the last few years?

In the year 2015-16, the government recovered EDC worth Rs 1,504 crore, followed by Rs 1,162 crore in 2016-17, Rs 1,651 crore in 2017-18, Rs 1,400 crore in 2018-19 and Rs 1,027 crore in 2019-20. The recovery process took a major hit after the lockdown began. The recover of EDC in April 2020 was nil, while it was Rs. 2.27 crore in May, Rs 20.15 crore in June and Rs 13.77 crore in July.

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