The GMR Group has walked out of the 555-km long Kishangarh-Udaipur-Ahmedabad National Highway, 16 months after it won this in a bid in which it promised to pay the National Highways Authority of India (NHAI) over Rs 9,000 crore on a net present value basis. The company issued a Notice of Intention to terminate the agreement to NHAI under clause 37.2 of the concession agreement last Friday.
An NHAI official confirmed getting the notice and said NHAI had been asking the environment ministry for clearances. Even the PMO has issued instructions on the matter. GMR spokesperson refused to comment on the matter.
According to sources GMR has said NHAI has not kept its promise as written in the contract. Not only had NHAI failed to get the necessary environment clearance for one of the tunnels along the highway — under the contract, this was NHAI’s obligation — it had not even asked the GMR Group for more time to do this. “Therefore the Authority”, the GMR letter says, “has been in continuous default in complying with the provisions of the Agreement. The Authority has thus clearly repudiated the Agreement.”
NHAI has up to January 4 to reply to the notice, after which GMR is likely to issue a termination notice as per clause 37.2.2.
According to sources, while the GMR Group brought in Rs 800-850 crore as its share of equity in order to achieve financial close in May this year, it also mobilised around 300 workers for six-laning of the four-lane highway.
Apart from the environment clearance, NHAI has also not notified toll rates for the highway. Last year, in order to make road projects more viable, the government had decided to allow concessionaires to collect toll on the basis of a six-lane expressway even while the highway was being expanded from four lanes to six.
While this was opposed by sections of NHAI, they were overruled as not doing this would only increase the amount of viability gap financing (VGF) that prospective concessionaires would demand from NHAI. So, while GMR Group was paying interest on the funds it had raised, its ability to raise higher revenues had been compromised.
For 33 projects bid out in 2011, NHAI officials had estimated that they would have to pay out VGFs of Rs 3,400 crore on an NPV basis, they actually got bids that would pay NHAI Rs 19,000 crore on an NPV basis