Land acquisition delays, non-payment of performance guarantee prove roadblocks

Projects to build 2,500 km of highways –— a large part of which were awarded in the third year of the UPA-II regime — have been cancelled. The National Highways Authority of India (NHAI) awarded most these projects in 2011-12. In the subsequent years — 2012-13 and 2013-14 — because of the economic slowdown, firms did not respond to many bids that were floated by the NHAI.

The projects that have been cancelled include Jabalpur-Lakhanadon (originally bagged by Ganone Dunkerley), Vadodara-Surat including Narmada bridge (HCC), Lucknow-Sultanpur (Essar-Atlanta), Hospet-Bellary (PNC-Betul), Karnataka-Kerala border–Kannur (Transtroy), Angul-Sambalpur (Abhijeet), Jabalpur-Katni-Rewa (Soma Tollways) and Raipur-Bilaspur (IVRCL Assets). “Some 23 projects — most of which were awarded in 2011-12 — have been cancelled, foreclosed or terminated because of developers not paying performance guarantees or due to delays in land acquisition or environmental clearances. Two of the cancelled projects have been re-awarded,” said an NHAI official.

Appraisal committee

Fresh bids for such projects can be invited only after an inter-Ministerial body — the public-private partnership appraisal committee — revises the costs upwards taking into account the inflation since the time the project was awarded. The list of cancelled projects is likely to get longer, say NHAI and industry sources.

This is because many road developers who have not yet started working on projects awarded two-three years ago are yet to take a clear stance on whether they will continue or surrender the projects after evaluating the premium re-scheduling proposal. But the proposal, which was approved recently, does not have enough to turn these projects viable.

The proposal permitting premium deferment will largely help projects on which work has already started. Looking to postpone their premium payment include two projects of IRB Infrastructure (Ahmedabad-Vadodara, Chitradurga-Tumkur Bypass), three of Reliance Infrastructure (Pune-Satara, Hosur-Krishnagiri, Kandla-Mundra Port), one each of L&T IDPL (Gandhidham-Samakhiali), Essel Infrastructure (Walajahpet-Poonamallee) and SREI Infrastructure (Sholapur-Maharashtra-Karnataka border), said another source in the know.

(This article was published on March 23, 2014)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.