Finance Ministry Invokes Force Majeure Relief For Contracts Hit By West Asia Conflict

(MENAFN- KNN India) New Delhi, May 4 (KNN) The Ministry of Finance has declared the ongoing West Asia situation as a Force Majeure (FM) event for government procurement contracts, allowing relief for contractors and suppliers affected by disruptions linked to the conflict.

In a notification, the Department of Expenditure said the prevailing situation in West Asia should be treated as 'war' under existing FM provisions outlined in government procurement manuals for goods, consultancy services, non-consultancy services, and works contracts.

Contract Deadlines Extended Without Penalties

The ministry said procuring entities may invoke FM clause in cases where disruptions arising from the West Asia situation have directly or indirectly impacted contractual obligations related to goods, services, and construction works involving government agencies.

Under the revised provisions, deadlines for contractual obligations due on or after February 28, 2026, can be extended by a minimum of two months and up to four months without imposing penalties or additional costs on contractors. The exact extension period will be decided by procuring entities on a case-by-case basis.

Conditions for Force Majeure Claims

The notification clarified that FM claims will be valid only if contracting parties were not already in default as of February 27, 2026. It also stated that relief would apply only to disruptions directly linked to the West Asia situation and would not cover unrelated non-performance.

As per existing rules, suppliers and contractors are required to notify authorities within a reasonable period, typically within 14 days of the event. If disruptions continue beyond 90 days, either party may choose to terminate the contract without financial repercussions.

Federation of Indian Micro, Small and Medium Enterprises (FISME) has welcomed this step and highlighted that the Force Majeure relief offers significant support to MSMEs involved in government contracts by protecting them from penalties due to delays caused by West Asia-related supply disruptions.

FISME also added that extended deadlines provide a period of recovery for small suppliers and contractors facing logistics challenges, helping them manage risks and maintain financial stability.

(KNN Bureau)

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