In fresh trouble for the concessionaire of the jeopardised Kundli Manesar Palwal (KMP) Expressway project, IDBI Bank that is the lead banker for the project has served the concessionaire - M/s KMP Expressways Limited with a substitution notice.
This means that the bankers have decided to step in for substitution of the concessionaire on account of its flagrant and continued defaults in performance of its financial and other obligations under the common rupee loan agreement.
Since March 2013, the progress of the inordinately delayed expressway project has come to a standstill at 68.85% with the concessionaire achieving 0% progress between March and December 2013. Its physical progress till January 2013 was 68.78%. The project is being monitored by the Supreme Court.
"The failure of the KMP Expressways to commence operation for around seven years since the commencement of the project coupled with non-servicing of the loan in a timely manner is causing grave concern and hardship to senior lenders. The toll collections would have been utilised towards servicing the loan had the concessionaire achieved the commercial operation date on time. The failure is squarely attributable to the wrongful acts of omission and commission on the part of KMP Expressways,'' said the lead lender in the substitution notice.
It said that to make matters worse, the concessionaire's repeated defaults in payment of instalments towards the loan has constrained all the consortium banks- IDBI, State Bank of India, India Infrastructure Finance Company, Canara Bank, State Bank of Mysore, State Bank of Travancore, State Bank of Patiala, Vijaya Bank, United Bank of India, UCO Bank and Dena Bank to declare the loan as non-performing assets and stop making disbursement towards the project.
"KMP Expressways has defaulted in repayment of its loan to the senior lenders in as much as it has defaulted in making the payment of monthly instalments towards principal due since June 2013 and payment of monthly interest since May 2013. In fact, it has committed a breach of its repayment obligations despite the fact that on its request the loan was restructured and loan repayment schedule was revised by the senior lenders. This constituted an event of default under the rupee loan agreement and substitution agreement,'' said the notice.
It said that restructuring of the project was necessitated primarily due to the failure of KMP Expressways to achieve the commercial operation date. On a representation made by the concessionaire stating that the commercial operation date would be achieved by May 2013, the senior lenders had agreed to sanction an additional loan of R230 crore subject to the pre-condition that matching equity of R153 crore was brought in by the promoters, 30% of which was to be paid upfront. " However, KMP Expressways not only failed to bring in the requisite equity contribution, it also failed to complete the security for the additional loan and fulfill all pre-conditions for disbursal,'' the notice said.
The lead banker said there have been multiple revisions in the project completion schedule. The lenders have always acted in the interest of the project and even agreed to sanction additional loans on the concessionaire's request. "However, these efforts of lenders have come to a naught,'' the lead banker said.
The substitution notice has been served as per the provisions of the substitution agreement executed between the executing agency for the development of the project -- Haryana State Industrial and Infrastructure Development Corporation (HSIIDC), concessionaire M/s KMP Expressways Ltd and the lenders' agent, IDBI Bank.
The jinxed KMP Expressway project
A 136-km expressway loop around the national capital region (NCR) to provide high-speed connectivity and decongest New Delhi. KMP takes off from National Highway-1 near Kundli (Sonepat) and joins Delhi-Faridabad-Agra NH-2 near Palwal.
THE BUILDERS: The construction on built-transfer-operate basis was allotted to KMP Expressway Ltd, a consortium of M/s Madhucon Projects Ltd, DS Constructions and Apollo Enterprises on November 14, 2005. DS Constructions is the lead consortium partner in the project. The concessionaire will construct, operate and maintain the project for 23 years and nine months from the appointed date.
DEADLINE: Started in 2006, the project was to be commissioned on July 29, 2009.
CURRENT STATUS: Delayed by over four years, just 69% of the project completed till December 2013.
COST: Rs 1,915 crore
A concessionaire is the holder or operator of a concession. The Haryana government by way of an agreement has granted KMP Expressways Ltd the concession to construct, operate and maintain the project for 23 years and nine months commencing from the appointed date and ending on transfer date. The concessionaire will have exclusive right, licence and authority during the subsistence of the agreement.