Even as the Centre readies to take up two metro rail proposals for Chennai at an estimated cost of around Rs 11,000 crore at the Cabinet?s next meeting, the high-profile Hyderabad metro project?already derailed thanks to the probe into Maytas Infra making it virtually impossible for the project to achieve financial closure on time?will probably require fresh bidding.

?If Maytas is unable to achieve financial closure by March 18, it will be up to the Andhra Pradesh government to decide how it wants to put the project back on track. It could either approach the next best bidder, or call for fresh bids. But it will be difficult to get attractive bids if fresh bids are called,? a senior central government official said.

Fresh bids may have to be called anyway as the second-best bid in the original tendering process came from a consortium led by Nagarjuna Construction Company, whose group chairman KS Raju was arrested at the same time the Satyam Computer Services attempt to buy out Maytas Infra and Maytas Properties began to unravel.

While the Maytas Infra-led Nava Bharat consortium had agreed to pay Rs 30,311 crore during the 34-year concession period to the state as negative viability gap funding, the Nagarjuna-led consortium had agreed to pay Rs 250 crore as equity. Now, with both the groups in trouble, it is unlikely that banks would fund the debt component for the Rs 12,132-crore project. The other two bidders were consortia led by Reliance Energy and Essar Constructions, respectively.

Embroiled as it is in the Nagarjuna Finance case, it is unlikely that the Nagarjuna group would be able to help in the timely completion of the metro rail project, officials said. Experts note that the state government has a strong case for calling fresh bids citing the larger public interest.

?So far, Maytas has not been proven guilty. Unless some serious irregularities about Maytas surfaces, legally and technically they cannot be disqualified. But sufficient aspersions have been cast on the bidding process and doubts have been raised about the common set of promoters of Satyam and Maytas. Therefore, the bidding parameters should be changed. The bid should be based on viability gap funding and not landholding,? said Vinayak Chatterjee, chairman, Feedback Ventures.

Calling the metro rail an urban amenity, the Planning Commission had earlier favoured the viability gap-funding route, where the Centre extends a portion of the funds. The finance ministry, which had given its nod for the Hyderabad metro project, is keen on a viability gap fund grant of up to 20% for such PPPs, and is looking to persuade states to consider that route. The Centre is also pressing for more clarity on land use and valuations.

Hemant Sahai of law firm Hemant Sahai Associates, said, ?The government can invite a fresh limited bid from the other short-listed consortia in a short period of time. In the meanwhile, the government also will have to extend the financial closure period,? admitting that delays in the project are now inevitable.

MahaVitaran cancels contract

The Maharashtra government on Tuesday has asked Maharashtra State Electricity Distribution Company (MahaVitaran) to immediately cancel contracts worth Rs 481 crore awarded to Maytas Infra. The company had bagged the contract to strengthen the distribution network and feeder separation in north and western Maharashtra, as well as in the underdeveloped Marathwada region, in September 2008. State chief minister Ashok Chavan made the announcement after a Cabinet meeting on Wednesday.

A MahaVitaran official told FE: ?MahaVitaran was not totally satisfied with the slow pace of work by Maytas Infra. It was in the midst of serving notice to Maytas Infra. MahaVitaran will follow the state government?s directives and cancel its contracts.?