Subhash Chandra’s firm gets Rs157 cr from Haryana govt to complete KMP e-way
Subhash Chandra is an independent MP from Haryana, who won due to the support of the ruling BJP. The amount has been loaned by Haryana State Industrial and Infrastructure Development Corporation (HSIIDC), the executing agency for the project on build-operate-transfer (BOT) basis.Updated: Jan 29, 2020 13:40 IST
Giving a lease to life to the financially-embattled Essel Infraprojects of Rajya Sabha member Subhash Chandra as well as the unfinished Kundli-Manesar-Palwal (KMP) expressway project, the BJP-JJP government in Haryana has loaned Rs 157.5 crore to Essel’s company KMEL — the concessionaire for the 83km Kundli-Manesar section of the expressway — to complete the stretch by May this year.
Subhash Chandra is an independent MP from Haryana, who won due to the support of the ruling BJP. The amount has been loaned by Haryana State Industrial and Infrastructure Development Corporation (HSIIDC), the executing agency for the project on build-operate-transfer (BOT) basis.
Industries department officials said of Rs 157.5 crore lent to Essel, about Rs 74 crore would be utilised by the concessionaire to complete punch list works (a list of tasks to be completed at the end of the project). The remaining Rs 83 crore has been used for debt servicing so that the project does not become a non-performing asset (NPA), officials said. The punch list included road safety works such as completion of work on provision of unlined roadside drains, lining of roadside drains, construction of rest areas, completion of fencing works, stone masonry works in cross-drainage structures, stone pitching and plantation of avenue trees among others.
‘Safeguards in place’
Additional chief secretary (finance and industries) TVSN Prasad said the money given to Essel was not a loan, but provisional annuity. “Ours is a trailblazer model for setting NPAs right. We have put in place adequate safeguards to ensure that financially troubled Essel Infraprojects uses this money only for project completion. The Rs 74 crore has been put in an escrow account (an account opened in a bank where funds are accumulated for specific disbursements). Also, the lead bank has given an undertaking that funds will not be released until the HSIIDC gives a go-ahead,” he said.
“The loan will carry compounded interest at the rate which the HSIIDC is borrowing loan plus 3% spread and will be recovered from the proceeds of the annuity of the concessionaire. So, the concerns over the given money being misappropriated by the concessionaire have been addressed,” Prasad added.
He said it was important to ensure the project does not get derailed and the government gets the remaining works executed by the concessionaire. “In case the government decides to terminate the concession agreement on account of occurrence of event of default on part of the concessionaire, the HSIIDC would have to take over the burden of 80% of the concessionaire’s debt. Arbitration is already going on with the previous concessionaire. So, this was probably the best way to save the project,” he added.
Original plan was to loan Rs 225 crore
Initially, the government had devised a Rs 225-crore bailout for Essel after the board of HSIIDC directors took a decision in this regard citing “public interest”. However, the decision was modified following public criticism.
The 136km expressway was thrown open to the public by Prime Minister Narendra Modi in November 2018. However, the project was granted a provisional completion certificate then. As per the concession agreement, all punch list items were to be completed by concessionaire within 120 days from the date of issue of provisional certificate. When the concessionaire defaulted, the HSIIDC issued a preliminary notice of termination to Essel for material breach of provisions of the concession agreement on account of its default in completion of punch list works. Material breach meant failure of performance under the contract. However, the HSIIDC board of directors in August 2019 took a view that the corporation should provide a loan of Rs 225 crore to Essel in view of larger public interest.
Will complete works by May: Essel
An Essel group spokesperson said instead of releasing the first annuity payment on due date, HSIIDC issued notices to them alleging several defaults under clauses of concession agreement, suspending the annuity payment, declaring the provisional COD infructuous, withdrawing the same and proposing to give interest bearing advance instead of the annuity due.
Eventually, the concessionaire agreed to take provisional annuity or advance payment in larger public interest. “We were made to give an undertaking to release the provisional annuity (in lieu of the first annuity due in August 2019) of Rs 157.5 crore. The provisional annuity will be adjusted against first annuity once balance punch list works are completed. We started the work on balance punch list items immediately upon receipt of provisional annuity payment and requested for approvals for on-account payments for subcontractors. However, same has not been approved till date. Though we are facing acute financial crisis, we plan to complete the balance punch list items by May 2020, well before the onset of monsoon, provided required assistance and timely approvals for payments being made by the HSIIDC in addition to forthcoming annuity due in February 2020 for Rs 157.5 crore along with payment of bonus annuity amounting to Rs 68.25 crore,” the spokesperson said.