The government’s plan to widen the 555-km Kishangarh-Udaipur-Ahmedabad highway — one of the largest road projects in the country — has hit a bump again. In December 2012, the GMR Group had suddenly walked out of the six-laning project it had won a year before, citing regulatory lapses on the part of the National Highways Authority of India (NHAI). Even after the authority has split the project into six “packages” to attract bidders, at least two of them have landed in fresh trouble.
Official sources said that Tata group’s TRIL Roads Pvt Ltd, which emerged as the highest (H1) bidder of the 90-km Kishangarh-Gulabpura and the 125-km Gulabpura-Chittorgarh sectors under the BOT (toll) model, has opted out of the process, stating that it had “miscalculated” the projects’ cost and revenue potential. While sources indicated that other bidders who were in the fray for the two stretches also placed “premium bids”, NHAI chairman Raghav Chandra told FE the two projects would be bid out afresh. In both cases, TRIL Road’s bid security amounts — R10 crore each — have been forfeited. The Tata group firm has, however, not withdrawn from the third BOT (toll) stretch, the 93.5-km Chittorgarh-Udaipur highway. The 555-km project also includes two hybrid-annuity segments and one being developed via the conventional engineering, procurement, and construction route.
TRIL’s withdrawal from the two projects signal continued investor apathy in BOT (build, operate, transfer) projects and the fact that public-private partnerships in the sector continue to flounder despite government efforts to pep it up. Though NHAI had awarded 79 highway projects between May, 2015 and March, 2016, only seven of these were under BOT. Another 63 were in the EPC category, while nine projects are to be developed via the new hybrid annuity route, where the developers’ risk is considerably mitigated with 40% of the project cost borne by the government. FE recently reported about the unwillingness of major lenders to fund the hybrid annuity projects, where the developer’s equity exposure is limited.
In the case of BOT toll projects, the bidders have the option of offering to pay the NHAI premium amounts over the tenure of the contracts — usually 30 years — on a net present value basis.
Alternatively, if the project is not found viable, the bidders can ask for grants from NHAI. Sources said in the cases of both projects from which TRIL has sought to withdraw after placing the bids were in the premium category, while it could not be ascertained as to which category the third project — for which the firm is again the winning bidder and still interested in — belongs. NHAI sources, however, said in the case of all six packages for the Kishangarh-Udaipur-Ahmedabad project, bidder interest has been satisfactory and the projects would be awarded and completed in due course.
The GMR Group, which had won the entire project in September 2011, had issued a notice of intention to terminate the agreement to NHAI under Clause 37.2 of the concession agreement in December, 2012. The group had said NHAI had not done what it had promised to do under the contract and alleged a “material default” on its part.