Maharashtra Government Turns to TReDS to Resolve PWD Contractors' Payment Delays
The Maharashtra cabinet has taken a significant step to address the long-standing issue of delayed payments to contractors by approving the use of the Trade Receivables Electronic Discounting System (TReDS) platform. This decision aims to clear dues for contractors working with the Public Works Department (PWD), who have faced non-payment of bills for nearly two years.
Background of Sustained Protests and Financial Strain
The move comes in response to sustained protests by contractors from various departments, including the PWD, Water Supply, Sanitation Department, and Rural Development Department. These contractors have been vocal about their struggles due to the non-payment of bills, which has persisted for almost two years. Contractor bodies have repeatedly warned of halting ongoing works and have demanded a waiver of GST to help them recover pending dues.
According to the Maharashtra State Contractors Association, the umbrella body representing contractors across the state, the total outstanding payments are estimated to be around ₹70,000 crore. This massive backlog has created acute fund constraints and mounting delays, prompting the state government to seek an innovative solution.
How TReDS Will Work for Contractors
Under the newly approved TReDS mechanism, contractors will be able to raise their invoices on the electronic platform. Once the invoices are uploaded, participating financial institutions will step in to make payments to the contractors. The state government will then repay these financiers within a period of one year.
This system offers a dual benefit: it ensures partial and timely liquidity for contractors, while also allowing the cash-strapped state government to defer immediate outflow from its own coffers. The TReDS platform is a joint initiative of the Government of India and the Reserve Bank of India, designed to promote financial inclusion, support the Make in India and Skill India campaigns, and facilitate financing for Micro, Small, and Medium Enterprises (MSMEs).
Operational Steps of the TReDS Platform
The TReDS platform operates through a structured process to ensure efficiency and transparency:
- Creation of a Factoring Unit (FU): This unit contains details of invoices or bills evidencing the sale of goods or services by MSME sellers to buyers. It is uploaded on the TReDS platform by the seller in case of factoring or by the buyer in case of reverse factoring.
- Acceptance of the FU: The counterparty buyer or seller accepts the Factoring Unit as applicable.
- Bidding by Financiers: Multiple financiers participate in bidding for the invoices.
- Selection of the Best Bid: The seller or buyer selects the most favorable bid based on the terms offered.
- Payment to the MSME Seller: The financier makes the payment to the MSME seller at the agreed rate of financing or discounting.
- Payment by the Buyer: On the due date, the buyer repays the financier, completing the transaction cycle.
Government and Contractor Reactions
An official from the PWD highlighted the potential benefits of this system, stating, "This system will bring transparency to the PWD billing process, helping contractors expand operations and upgrade technology. Following successful implementation, the platform will be integrated with e-tendering and e-procurement portals for seamless invoice submission and discounting."
Milind Bhosle, president of the Maharashtra State Contractors Association, welcomed the move, noting that the demand for adopting TReDS had been pending for over a year. "We had raised this demand in February 2025 and even submitted a proposal for the same. After that, several meetings at the government level were held, and finally, the state cabinet has given approval for this. We hope that small contractors will be able to get some money out of it," he said.
Broader Implications and Future Integration
The approval marks a critical shift in how the Maharashtra government handles contractor payments, potentially setting a precedent for other states facing similar issues. By leveraging TReDS, the government aims to not only address immediate liquidity concerns but also enhance overall efficiency in public works projects.
The integration of TReDS with e-tendering and e-procurement portals is expected to streamline processes further, reducing bureaucratic delays and fostering a more transparent ecosystem for contractors and the government alike. This move underscores the state's commitment to leveraging digital solutions to tackle persistent financial challenges and support the growth of MSMEs in the region.
