Infra major terminates Kishangarh-Udaipur-Ahmedabad road pact

The country’s largest highway project, which was to be undertaken on public-private partnership (PPP) basis, is likely to head for arbitration.

Even as the National Highways Authority of India (NHAI) contests the legality of infra major GMR’s right to withdraw from the country’s largest highway project being undertaken on a PPP basis, the company informed the stock exchanges that it had terminated the concession agreement.

Meanwhile, anticipating that NHAI might forfeit the company’s performance bank guarantee of about Rs 260 crore, GMR had moved the Delhi High Court.

NHAI has contested the legality of the 15-day notice issued by GMR on December 21.

On Monday, GMR Infrastructure stated that GMR Kishangarh Udaipur Ahmedabad Expressways Ltd, a subsidiary of the company, had terminated the concession agreement entered into with National Highways Authority of India (NHAI) for six laning of 555 km Kishangarh-Udaipur-Ahmedabad highway.

The Kishangarh-Udaipur-Ahmedabad highway project cost is estimated at about Rs 7,500 crore, out of which GMR had planned to put in a total equity of Rs 2,200 crore. Of this, it has already infused about Rs 700 crore.

The company required a debt of Rs 5,400 crore, for which it had tied up with a consortium of 22 banks. But it has not drawn down any debt from the banks.

With GMR stating that it has terminated the agreement, another infra major, Larsen and Toubro, may lose the engineering procurement contract of Rs 2,164 crore to build the road.

The status of this project is like another PPP project that is under arbitration — the Airport Metro express project, in which Reliance Infrastructure issued a termination notice to Delhi Metro Rail Corporation (DMRC), while DMRC took a stance of not accepting Reliance Infra’s suo motu move of withdrawing.

Incidentally, the industry had perceived GMR’s bid as pretty aggressive for the project.

GMR offered to pay NHAI a premium of over Rs 600 crore a year for 26 years to win the rights to develop and operate this project.

On the stock exchange, GMR Infra closed at Rs 20.55, up over three per cent.

Mamuni.das@thehindu.co.in

(This article was published on January 7, 2013)
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