Subhash Chandra’s firm to get ₹225-cr bailout to finish e-way
Rajya Sabha MP Subhash Chandra’s financially beleaguered Essel Infraproject, the concessionaire for the 83 kilometre Kundli-Manesar stretch of the Kundli Manesar Palwal (KMP) Expressway, will soon get a ₹225-crore bailout from a Haryana government public sector undertaking.
The decision to pay ₹225 crore loan to Essel was taken last month by the board of directors of Haryana State Industrial and Infrastructure Development Corporation (HSIIDC), citing “public interest”. The HSIIDC is the executing agency for the project on build-operate-transfer (BOT) basis. The move to give loan by the debt-ridden corporation is unusual and beyond the scope of the concession agreement. The 136-kilometre long expressway was thrown open to the public by Prime Minister Narendra Modi in November 2018. Subhash Chandra is an independent MP from Haryana, who won due to the support of the ruling Bharatiya Janata Party.
The finance department has advised that due diligence be exercised and approval of the committee on infrastructure of the cabinet be taken before the loan amount is released to Essel.
The HSIIDC has already issued a preliminary notice of termination to Essel for material breach of various provisions of the concession agreement. Material breach means failure of performance under the contract. “The notice has been issued to Essel on account of its default in completion of punch list works (a list of tasks to be completed at the end of the project), laxity in operation and maintenance activities,” said an HSIIDC official. 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, plantation of avenue trees along the edge of the right of way, landscaping works.
Essel Infraproject and Subhash Chandra did not respond to mails sent in this regard.
THE LOAN APPROVAL
Additional chief secretary (industries and commerce) Devender Singh, on being asked, said the decision to approve the loan was taken by the corporation to amicably resolve the matter and ensure the project does not get derailed.
“If the matter reaches the stage of termination of agreement and substitution, it would entangle the project and lead to arbitration. Even if the event of default on part of the concessionaire is established, we will have to take over the burden of 80% of the concessionaire’s debt. We are already embroiled in arbitration with the previous concessionaire,” Singh said.
The finance department in its advice said that HSIIDC has presented a grim prospect of termination of the contract which could lead to substantial burden of termination payments on exchequer apart from rendering the expressway dysfunctional. Hence, they have presented a fait accompli (something that has already been done and cannot be changed), the department said.
WHY SUCH A SITUATION AROSE
The finance department has asked the HSIIDC to establish reasons as to why such a situation arose when the concessionaire had already taken commensurate loans from banks/ lenders but was unable to complete the works.
“It should also be ensured that there is no duplication of works/payments shown by the concessionaire, and the works done on e-way match the funds stated to have been utilised,” the finance department’s advice said.
The finance department in its advice also said that recovery should be made at the earliest from payable amounts including annuity.
“The loan will carry compounded interest at the rate which the HSIIDC is borrowing loan plus 3% spread and an undertaking should be taken from concessionaire, bankers and financial lenders,” the advice said.
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