Khattar govt disapproves Rs 1,300 crore settlement money fixed by Hooda regime

  • Hitender Rao, Hindustan Times, Chandigarh
  • Updated: Jan 18, 2015 08:11 IST

The Bharatiya Janata Party (BJP) government in Haryana has disapproved the Rs 1300 crore amount fixed by the previous Congress regime as payment for terminating the concession agreement with the concessionaire (contractor) for the inordinately delayed 136-km Kundli Manesar Palwal (KMP) expressway project.

The jinxed project is running behind schedule by over five years and is tangled in legal and financial complications.

The new BJP regime is keen to hand over the project for completion to the National Highways Authority of India (NHAI). However, the NHAI would not take up the project unless the project is free from financial liabilities.

‘Settlement amount needs a second look’

“The termination payment/settlement amount of Rs 1300 crore approved by the previous government needs to be revisited in light of three different evaluations done. More importantly the total value of work as per the concession agreement could not be more than the estimated cost of Rs 1200 crore as the concessionaire was allowed to recover only this much towards the cost of construction,’’ said an official. The project cost at the time of bidding was Rs 1200 crore and the concessionaire KMP Expressways Ltd had submitted an unqualified bid accepting the amount of work order on the estimated construction cost of Rs 1200 crore.

The state government has also filed an affidavit to this effect in the Supreme Court which is monitoring the implementation of the project.

‘Let a govt body evaluate’

A committee comprising principal secretary, finance, PK Das; principal secretary, industries and commerce, Devender Singh and Managing Director, Haryana State Industrial and Infrastructure Corporation (HSIIDC), Vineet Garg, which was constituted to look into the issue suggested that the actual volume of work done and the classification of work done should be reassessed by a government organisation to arrive at a credible figure.

The committee which scrutinised the evaluation of the work done and amount to be paid as settlement money to the concessionaire and lenders said that the proposal submitted in February 2014 before the Environment Pollution (Prevention and Control) Authority (EPCA) by ICICI Bank is invalid as ICICI Bank is not a lender and thus has no locus standi to be associated with the substitution process.

Stinging remarks on concessionaire

The Committee has also made stinging remarks on the concessionaire as well as the consultants raising doubts over methodology adopted for determining the correct amount for work done and amount fixed as termination payment.

“The concessionaire had appointed one of its group company M/s DS Constructions as the engineering procurement and construction contractor without a reasonably transparent process.

This raises a doubt as to whether a true rate discovery for EPC contract was undertaken. Secondly, the difference in volume of work done as assessed by the M/s SNC Lavalin, the independent consultant for the project and AECOM consultants appointed by M/s ICICI Bank warranted a closer examination of the report.

The difference in volume of work and classification of work raises prima facie doubts about the different figures of volume of work. Unless reconciled objectively, these would have huge financial implications,’’ the committee observed
Questioning the methodology adopted for evaluating the prevalent market rate by consultants appointed by the HSIIDC, Feedback Ventures and ICICI Bank-appointed AECOM, the committee has termed them as inappropriate

Substitution notice by lenders

Following delays and concessionaire’s inability to keep up the flow of funds, the IDBI bank, which is the lead banker for the project, had served the concessionaire with a substitution notice.

This meant that the lenders had 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.

The Congress which allotted the construction work of the expressway to the concessionaire subsequently decided to go beyond the provisions of the concession agreement to terminate the agreement and bring a new player to put the project back on track.

The debatable option entailed terminating the concession agreement with mutual consent and giving the contract for construction of the project to a new company.

The previous regime also approved termination payment of Rs 1,300 crore to be paid to concessionaire and lenders by the new company, which will be given the contract to complete the project.

The Rs 1,300 crore was fixed as termination payment on account of the work done on the expressway project.

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