The Union ministry of road transport and highways (MoRTH) on Friday expressed a clear disinclination to take over the construction of the jeopardised 136-km Kundli Manesar Palwal (KMP) expressway unless the Haryana government clears the project of all financial liabilities.
The jinxed project is running behind schedule by over five years and is tangled in legal and financial complications.
At a meeting of the central and state officials held in New Delhi over the issue, top central officials advised the Haryana government to get rid of the concessionaire KMP Expressways Ltd by terminating the concession agreement. Union MoRTH secretary Vijay Chhibber and NHAI officials were present in the meeting.
‘Terminate the agreement’
“We have two options with us. Either terminate the concession agreement or go in for settlement of liability as per the actual cost of construction. Under the first option, the lenders would not get any money back as the concession agreement stipulates so. The state government can consider going in for settlement with mutual consent but only if the new concessionaire and lenders are ready to be reasonable by not asking for an additional concession period,’’ said a Haryana official.
The previous Congress regime in Haryana, which allotted the construction work of the Expressway to concessionaire KMP Expressways Ltd, had 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 government’s idea behind choosing the settlement option outside the scope of the concession agreement was to avoid litigation and arbitration.
New govt rejects Rs 1300 settlement amount
While the Congress government approved termination payment of Rs 1,300 crore to be paid to concessionaire and lenders as settlement payment, the BJP government disapproved the amount. The state government has also filed an affidavit in the Supreme Court stating that the termination payment/settlement amount of Rs 1300 crore approved by the previous government needs to be revisited in light of different evaluations. Also since 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. While approving the Rs 1300 crore as settlement money, the previous government did not consult the finance department.
‘ICICI Bank has no locus standi’
Officials said that the proposal submitted by ICICI Bank before the Environment Pollution (Prevention and Control) Authority (EPCA) on February 15, 2014 to settle the matter outside the provisions of the concession agreement was unacceptable as ICICI bank was not a lender and has no locus standi to be associated with the substitution process. Officials said that equity shown by the concessionaire was actually loaned from the ICICI Bank. The ICICI bank had lent about 135 million dollars to a Mauritius-based entity associated with the concessionaire.
The previous Congress regime in Haryana, which allotted the construction work of the Expressway to concessionaire KMP Expressways Ltd, had 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 government’s idea behind choosing the settlement option outside the scope of the concession agreement was to avoid litigation and arbitration.
New govt rejects Rs 1300 settlement amount
While the Congress government approved termination payment of Rs 1,300 crore to be paid to concessionaire and lenders as settlement payment, the BJP government disapproved the amount. The state government has also filed an affidavit in the Supreme Court stating that the termination payment/settlement amount of Rs 1300 crore approved by the previous government needs to be revisited in light of different evaluations. Also since 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. While approving the Rs 1300 crore as settlement money, the previous government did not consult the finance department.
‘ICICI Bank has no locus standi’
Officials said that the proposal submitted by ICICI Bank before the Environment Pollution (Prevention and Control) Authority (EPCA) on February 15, 2014 to settle the matter outside the provisions of the concession agreement was unacceptable as ICICI bank was not a lender and has no locus standi to be associated with the substitution process. Officials said that equity shown by the concessionaire was actually loaned from the ICICI Bank. The ICICI bank had lent about 135 million dollars to a Mauritius-based entity associated with the concessionaire.
As per the financial closure, the total project cost was estimated at Rs 1915 crore with Rs 1149 crore as debt amount and Rs 766 crore as equity amount. The concessionaire tied up Rs 1149 crore debt from IDBI bank and a consortium of 11 other banks.
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.