NHAI asks CAG to join in drafting policy road map

Instead of picking holes in policies later, why don?t you frame the right policy for us and give us immunity? This in sum seems to be what the National Highways Authority of India has asked of the Comptroller and Auditor General.

Instead of picking holes in policies later, why don?t you frame the right policy for us and give us immunity? This in sum seems to be what the National Highways Authority of India has asked of the Comptroller and Auditor General (CAG). The roads body has written to the national auditor seeking advise on how to modify the concession agreement for the stalled project to widen the Kishangarh-Udaipur-Ahmedabad highway to six lanes.

The CAG recently put the NHAI in a difficult spot by stating that the exchequer suffered a presumptive loss of R32,500 crore owing to the GMR Group?s unilateral termination of the concession agreement for the 555-km project, citing delays in clearance and NHAI?s alleged non-compliance with certain provisions of the agreement. The infrastructure major later relented and told the authority that if the terms of agreement are modified to its satisfaction, it could come back to the project.

The NHAI move is perhaps the first instance of the nation?s top auditor, seen to be more proactive and selective in its audit process in recent years, being urged to involve itself in the policy formulation exercise.

In a letter to CAG Vinod Rai, NHAI chairman RP Singh has asked the auditor to deliberate on modification of the concession agreement under which the project was originally awarded to GMR.

Singh wrote: ?This issue has wider implications for the road sector and needs careful resolution in order to protect the government?s interest.?

The request has been made after the authority went all out to dispute the CAG?s assessment that termination of the project involving widening of the Kishangarh-Udaipur-Ahmedabad section of National Highway 7 passing through Rajasthan and Gujarat caused a loss of R32,500 crore to the exchequer. In an earlier hard-hitting letter to the CAG, Singh had termed the auditor?s estimate as ?sensational? with ?fallacious notion of loss? figures that would only discourage officers from taking decisions at a time when the road sector was going through a tough phase.

The authority is now worried that non-consideration of GMR?s proposal of premium rescheduling can also have revenue implications as rebidding would not yield premiums anywhere near the level committed by GMR. ?In such an event, the audit can again tomorrow comment that NHAI is responsible for not considering the proposal and causing loss to the government,? said NHAI in another letter written to officers of the audit party engaged in the matter.

NHAI awarded the stretch to GMR on September 22, 2011, but work on the project could not start as the authority could not get the relevant environmental and forestry clearances. GMR had won the project agreeing to pay the government a premium at a time when prospects of the road sector were looking good. Last year, however, the company decided to walk away from the project due to delays in green clearances. The matter is now in court but GMR has already written to the Prime Minister?s Office (PMO) indicating its interest to take back the project if NHAI agreed to relax the concession agreement and allowed it to pay lower a premium in the initial few years.

?We are examining the company?s proposal to reschedule the premium payable for the project without affecting the net present value (NPV) of the total premium due over the concession period,? said an NHAI official who did not wish to be named as the matter is in the court. GMR had approached the Delhi High Court to prevent NHAI from encashing the performance guarantee after the company issued its termination notice. The next hearing on the matter is scheduled on April 30.

GMR had quoted an annual upfront revenue of Rs 636 crore for the highway project where the premium would increase by 5% every year for the entire concession period of 26 years. The total premium burden on GMR worked out to around Rs 9,000 crore on NPV basis. The project cost estimated by NHAI was Rs 7,700 crore. Most projects bid out in 2011 commanded a premium or negative grant where NHAI gained from the payments made to it rather than providing grants for projects in the form of viability gap funding.

Highway milestones

Sept 27, 2011

GMR wins 555-km-long Kishangarh-Udaipur-Ahemadabad highway bid

Dec 28, 2012

GMR sends letter to NHAI seeking early clearances

Jan 8, 2013

GMR terminates agreement with NHAI for the project

Feb 7, 2013

CAG sends audit report to the roads authority

Feb 22, 2013

Project gets environment clearance

Feb 22, 2013

GMR writes to PMO, expressing interest in project if terms are modified

March 1, 2013

NHAI replies to CAG audit party

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First published on: 14-03-2013 at 02:08 IST