Lenders to the 135.6-km Kundli-Manesar-Palwal (KMP) expressway plan to ask the concessionaire to give up the project, which has been delayed by nearly four years and is nowhere near completion. We plan to ask the concessionaire to give up the project to someone else, said a banker in the know of the development, adding that at the current estimate of R2,200 crore, the cost overrun has been significant. The concessionaire, KMP Expressways, is a consortium of three companies led by the HS Narula-promoted DSC Group. A group of banks led by IDBI Bank, which had agreed to lend close to R1,150 crore when the project took off in 2006, will be meeting with them in the next 10 days.
The lenders have already disbursed over 85% of the sanctioned amount, the banker said. The project is owned by Haryana State Industrial and Infrastructure Development Corporation (HSIIDC), which has put a fine of 0.1% of the total project cost per week since July 30, 2009. On June 30 this year, the project will complete the maximum permissible time of four years since its scheduled commercial operation date (CoD), which is the time given by Reserve Bank of India (RBI) for infrastructure projects. The project, which had undergone one round of restructuring earlier, covers the entire National Capital Region (NCR). It was first awarded to the DSC Group in 2006 and the CoD was set for July 29, 2009.
The DSC Group had been given a schedule of 23 years and nine months to complete the expressway on a build, operate and transfer (BOT) basis and recover its cost. The concessionaire has repeatedly missed the deadline and might not be able to complete the project before the targeted May 31. Bankers point out that delay is inexplicable given that land has been acquired and all clearances have come through. Initially, the expressway would be a four-lane road, but there would be room to widen it to six lanes.
Getting the DSC Group to sell the road, however, may not be that easy. In the case of the Delhi-Gurgaon expressway, also run by the group, the National Highways Authority of India (NHAI) served a termination notice after more than a year of high-decibel commuter complaints with traffic jams of up to several hours on the expressway. The notice followed several attempts to get the DSC Group to build more toll plazas and find other ways to streamline traffic management. After months of negotiation, a deal was approved by the NHAI board where IDFC the largest lender to the project agreed to take over the R1,600-crore debt and pay a token R1 for 74% of its equity.
The DSC case, however, remains in court, so it is not clear when the final takeover will take place.
While several road projects have been delayed in recent times, for various reasons, the recent delinking of the environmental and forest clearances would be a big facilitator allowing NHAI to start awarding orders for 3,000 km involving an outlay of approximately Rs 30,000 crore. Moreover, given the Rs 20,000 crore or so of funds that are locked up in disputes between NHAI and various road contractors, the governments proposal to appoint a roads regulator, should help resolve any issues. Currently, NHAI plays the role of both the concessioning authority as well as the final arbiter.
In the case of other road projects such as the 555-km Kishangarh-Udaipur-Ahmedabad National Highway where the GM Rao Group walked out citing NHAIs inability to get the required environmental clearances on time, NHAI and the concessionaire are in the process of working out a compromise solution that needs Cabinet approval. GMR has said it is willing to build the road provided the payments it needs to make to NHAI in the initial years are reduced while keeping the net present value (NPV) of the payments over the contracts life the same under the bid, GMR had promised to pay NHAI Rs 9,000 crore on an NPV basis for building and operating the project.
Road to nowhere
* With a current estimate of R2,200 cr, the cost overrun has been significant, said a lender to the concessionaire
* The concessionaire, KMP Expressways, is a consortium of three companies led by the HS Narula-promoted DSC Group
* IDBI Bank-led bankers, which agreed to lend R1,150 cr when the project started in 2006, will meet the developer in 10 days
* The lenders have already disbursed over 85% of the sanctioned amount for the project owned by HSIIDC