In a recent letter to the Prime Minister's Office, the ministry of road transport and highways has reiterated that the Infrastructure Development Finance Company (IDFC) doesn't qualify to be a lender to the Delhi-Gurgaon Expressway Project.
The clarification comes after the PMO sought the ministry's views on a communication from IDFC executive chairman Rajiv Lall, alleging that the ministry and NHAI's stance was “frustrating” and that the two have “inadequate knowledge of infrastructure financing”.
According to sources, secretary, highways, Vijay Chhibber, in a reply to the PMO, said IDFC lending to DS Constructions -- the developer of the expressway -- was “a clear case of violation of provisions of concession agreement", and the consortium led by IDFC does not qualify as a recognised lender.
Recognition of IDFC as a lender is a prerequisite for its getting substitution right to replace DS Construction as developer. DSC has defaulted several times under various clauses of the model concession agreement.
"It is not for IDFC or concessionaire to examine and satisfy whether the loan of R1,600 crore had the effect of increasing the financial liability or imposing any obligation on NHAI... Thus, it is incorrect to argue that the loan of R1,600 crore has not increased financial liability or obligation on NHAI," Chhibber said.
The road ministry has also said in the letter to the PMO that it favours the termination of the developer's contract. The NHAI, which is in a running battle with DS Construction over the poor management of the expressway, had served a termination notice to DS Construction last year. NHAI which had, in January last year, backed a proposal to allow IDFC to buy out 74% of the project’s equity — IDFC was to take on the project’s entire debt and buy 74% of DS Construction’s equity for a token Re 1 –— had since changed its stance and said it does not even recognise IDFC as a bona fide lender to the project.
The project has an interesting history, with an initial loan of R383 crore given by a Hudco-led consortium. In January 2009, however, DS Construction had approached NHAI to substitute this consortium with one led by SBI — the loan component was then raised to R1,275 crore. NHAI’s consent was required, since under such concessions, NHAI agrees to pay most of the debt in case a project is terminated. Later, DSC took a R1,600-crore