To prevent further delay in Mumbai Trans Harbour Link, MMRDA is trying to ensure that the consortium in charge does not desert the showpiece project once the work begins. The authority will design the concession agreement in a manner that a significant amount of the concessionaire’s equity, roughly Rs 2,000 crore, will be locked in the project right at the onset.
The high-risk project has had a few false starts, with two failed rounds of bidding. The project has finally been set in motion with MMRDA having invited technical and financial bids last month.
The locking-in of equity was one of the main conditions of the Union Finance Ministry before granting viability gap funding (VGF), which is the government’s contribution to a public-private-partnership (PPP) project, for the Rs 9,630 crore project. The VGF is a maximum of 40 per cent of the project cost, while the concessionaire brings in the rest through a combination of equity and debt.
As per the conditions of the central government, the concessionaire will have to first use up the equity component before turning to debt. Likewise, the central government will release VGF bit-by-bit once the concessionaire has exhausted the equity component and is starting to put in debt, said Rahul Asthana, metropolitan commissioner at MMRDA.
“Typically, about 20 per cent of the project cost is in the form of equity, which means the concessionaire will have to first put roughly Rs 2,000 crore. This will ensure that the concessionaire’s equity is in the project so that he does not leave it midway,” Asthana said.
The central government has committed VGF of Rs 1,920 crore, or 20 per cent of the project cost, while the state government will grant the rest.
n The Sewri-Nhava bridge, which will boast of the longest sea link in the country, was in the planning stages for more than three decades
n It has gone through two failed rounds of tendering. The first time, bids submitted by the Ambani brothers were found unrealistic, while the second time, not a single company came forward to bid
n MMRDA revived the project in 2011