Centre plans to split 555-km project, rejects GMRs restructuring proposal

Written by Mihir Mishra | New Delhi | Updated: May 31 2013, 06:58am hrs
The road ministry plans to break the 555-km Kishangarh-Udaipur-Ahmedabad project into two or more projects of smaller sizes and rebid them separately to make them a viable proposition.

The project in its current form is the largest road sector project to have been awarded by the Indian government, but it ran into difficulties as the concessionaire, GMR Infrastructure, pulled out last year citing lack of environmental clearances. The company had bid aggressively for the project in 2011, considered a phase of change for the Indian road sector.

A road transport ministry official said the options were to create two parcels. One stretch would be of 300 km, connecting Kishangarh to Udaipur, and the other would be of 255 km, linking Udaipur with Ahmedabad.

The restructuring proposal sent by the company has been rejected by the government and is not likely to go any further. Now, we need to find ways to rebid the project and breaking it into two or more will surely make it viable. It is surely not viable for the developer now, said a senior road ministry official.

The proposal to rebid the project is being discussed after the law ministry rejected the proposal of the road ministry and the National Highways Authority of India (NHAI) to restructure the premium payment schedule for the 555-km project. The project runs parallel to the Delh-Mumbai Industrial Corridor and any delay in awarding the road contract could impact the latter's viability too.

According to the restructuring proposal submitted by GMR, the company has sought permission to pay lower than the promised premium during the initial years, in a way that the net present value remains the same.

How can they pay only R70 crore as premium in the first year when the annual toll earnings from the project are around R400 crore Keeping a large part of toll earnings means they are building roads through this money. If the road is to be built from toll earnings, we would have done it ourselves, said the ministry official.

Interestingly, a move to make these projects smaller in size to make them viable contradicts the government's stand in 2011. The then road transport minister Kamal Nath had asked to bid out large projects, instead of smaller ones, to get large road developers into the road sector, who would only find large projects viable.

One of such projects was the 555-km project that was bagged by GMR Infrastructure in June 2011. Sixteen months after that, the company pulled out of the project due to delays in environmental clearances.

GMR later sent a proposal to undertake the project after it was restructured. The company has sought discount in the payment of annual premium during the initial years in a way that the earnings of NHAI, in terms of net present value, remain the same.