Haryana government does not seem to be in a mood to give in to the demand of concessionaire of the much-delayed Kundli-Manesar-Palwal (KMP) Expressway for the withdrawal of a show cause notice issued by state authorities as to why penal action under the concession agreement be not initiated against the operator for delaying the project.
The concessionaire had also asked the government to finalise the change of scope in the construction work and ensure an amicable settlement of dues.
Expressways chairperson HS Kohli recently met chief minister Bhupinder Singh Hooda, seeking relief.
As per the concession agreement, the concessionaire will pay weekly damages at the rate of 0.01% of the total project cost to the Haryana State Industrial and Infrastructure Corporation (HSIIDC) if project is not completed by July 29, 2009. The commercial operation date (CoD) of the expressway was July 29, 2009, but the concessionaire not only missed the 2009 deadline it also failed to honour several revised completion dates. The concessionaire has so far made 66% progress on the ground.
If the state government had invoked the penal in July 2009, the concessionaire would have been forced to pay about Rs. 27 crore till April 2012.
After dilly-dallying for over two years, the state government had, in November 2011, decided to initiate penal action against the concessionaire. The HSIIDC had also appointed a law firm - MV Kini and Company -advocates and solicitors for getting the showcause notice vetted and finalised since the initiation of penal action involved contractual and financial implications.
The state government had also written to the Union ministry of road transport and highways and National Highways Authority of India (NHAI) apprising them of the poor performance and conduct of KMP Expressways Ltd.
The lending institutions financing the expressway project, too, had expressed serious concerns over the delay. In fact, IDBI Bank had written to the state government saying that inordinate delay in the completion of the project was liable to attract Reserve Bank of India provisions regarding classification of the project as a non-performing asset (NPA).
While independent consultant SNC-Lavalin Pvt Ltd had proposed that penal action under clause 15.4 would be relevant to priority stretch with effect from August 19, 2011, till its completion, the HSIIDC said penal action would be relevant to the whole stretch of the expressway since the concessionaire has not achieved monthly targets set by him for the past two years and has been revising the targets time and again despite the availability of funds. It proposed that the penal clause be invoked with effect from July 29, 2009, till the CoD is achieved.
What is change of scope and settlement of dues?
The concessionaire had to undertake a change in the scope of work for construction of interchanges of the expressway on National Highway (NH)-8, NH-1, NH-10 and NH-2 necessitated, as the NHAI wanted to make the junctions of NH-8 and NH-10 signal free.
The junctions of NH-1 and NH-2 were altered to align them with the proposed Eastern Peripheral Expressway (EPE) at these locations.
There was also a change of scope due to increase in the height of railway over bridge (ROB) on the Garhi-Harsaru-Farukh Nagar railway line for movement of double stack containers.
"The concessionaire submitted exorbitant cost estimates amounting to Rs. 255 crore against the change of scope for the construction of interchange of expressway at NH-1, NH-2, NH-8, NH-10 and increase in the height of ROB. These cost estimates were later brought down to Rs. 79 crore by the HSIIDC through mutual discussions with the engineers of the concessionaire and independent consultants. Moreover, the negative change of scope on account of reduction the quantity of fly ash and non-provision of granular sub-base layer roughly worked out to be Rs. 118 crore. Hence, the state government asked the concessionaire to deposit Rs. 39 crore towards the cost difference of positive and negative change of scope," officials said.
The construction work of the expressway was allotted to KMP Expressway Ltd, a special purpose vehicle (SPV), constituted by a consortium of DS Constructions Ltd, Madhucon Projects Ltd, and Apollo Enterprises on November 14, 2005 on built-operate-transfer (BOT) basis.
DS Constructions Ltd is the lead consortium partner in the project and DS Constructions director HS Kohli is the chairman of KMP Expressways Ltd.
Following delays, the state government had accorded in principle approval to the revised commercial operation date of December 31, 2010. The modalities of the revised CoD, however, could not be decided since the concessionaire continued missing deadlines.
While clause 15.4 of the concession agreement says that if the project was not completed by July 29, 2009, the concessionaire will pay weekly damages at the rate of 0.01% of the total project cost to the HSIIDC, the executing agency for development of the project on BOT basis, the clause 15.5 says that if the commercial operation date (CoD) does not occur within a year from the scheduled completion date, the HSIIDC will be entitled to terminate the agreement after giving a month's notice to the concessionaire for curing the relevant breach or default of provisions of agreement.
The total project cost had been estimated at Rs. 1915 crore out of which the debt and equity amount would be Rs. 1149 crore and Rs. 766 crore, respectively.
Who is a concessionaire?
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.