GVK Group wants out of 330-km highway in MP

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GVK Reddy, GVK Group chairman GVK Reddy, GVK Group chairman
SummaryA Few days after the GMR Group announced its intent to walk out of the 555-km long Kishangarh-Ahmedabad highway, the GVK Group has informed the National Highway Authority of India that it wishes to exit the 330-km long Shivpuri-Dewas highway in Madhya Pradesh.

A Few days after the GMR Group announced its intent to walk out of the 555-km long Kishangarh-Ahmedabad highway, the GVK Group has informed the National Highway Authority of India (NHAI) that it wishes to exit the 330-km long Shivpuri-Dewas highway in Madhya Pradesh. GVK had promised to pay NHAI a little under R3,000 crore (on an NPV basis, using a 10% annual discount) for the highway it was four-laning, over a period of 30 years — starting with a payment of R190 crore in the first year, the payment was to be escalated by 5% in each subsequent year.

GVK spokespersons refused to comment. NHAI sources say some more cancellations may be likely over the next few weeks, considering the grounds being cited by GMR and GVK are somewhat similar.

The 330-km road project, under Phase IV of the National Highways Development Project (NHDP) was awarded to the GVK group’s GVK Shivpuri Dewas Expressway Pvt Ltd in August 2011, though the concession agreement was signed only in January this year. Unlike in the GMR case where it took 16 months for the group to issue a ‘notice of intent to terminate’ the concession, the GVK Group sent its first letter of displeasure to NHAI in less than a year.

Towards the end of June, GVK Expressway told NHAI that a force majeure event had taken place after a Supreme Court verdict in February. In Deepak Kumar etc vs State of Haryana and Others etc, the Court directed that an environment clearance would be required in case a concessionaire needed to extract boulders and any other minor minerals — GVK needed to extract boulders to clear the area for the four-laning of the highway.

In the event, GVK Expressway said that this environment clearance had to be obtained by NHAI as part of the ‘conditions precedent’ clause of the concession agreement. The GVK Group kept sending reminders to NHAI after this, but NHAI was unable to get the required clearance.

“Accordingly”, the GVK Group’s notice of intent to terminate says, “the force majeure event mentioned in our letter dated June 29, 2012 continues to subsist on the date of this letter. We would like to bring to your notice that the aforementioned force majeure event has been in existence for a continuous period of more than 180 days.”

An NHAI reply to the GVK Group is expected over the next few days.

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