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Arbitrator may assess UB Group's damage claim in light rail project Rs 15 cr sought as compensation

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Our Bureau

Bangalore, Dec. 28

THE Karnataka Government is expected to appoint an arbitrator for resolving the claim from the UB Group for scrapping its ELRTS (Elevated Light Rail Transit System) project.

Sources in the UB Group told Business Line that the move comes in the wake of the liquor giant putting forth a claim of Rs 15 crore as compensation after Government cancelled the ELRTS project, which was awarded to the company earlier.

The Government had, in fact, imposed Re 1 as cess on petrol and diesel for vehicles in Bangalore for part funding the ELRTS project, but later abandoned the project stating that it was economically unviable and would not service the city fully. The project was awarded to the UB Group in January 1996 after an international bidding process. The 25-km elevated light rail system was conceived as a 74:26 venture with the Government-owned Bangalore Mass Rapid Transit Ltd as the other partner. The project cost was estimated at Rs 3,500 crore.

The UB Group's Chairman, Dr Vijay Mallya, had said that the project suffered because the State Government failed to provide financial assistance and guarantees, which was promised earlier. But a Government official said the project had to be scrapped because of its high cost and the consortium's demand for a higher Government share of about 37 per cent compared with 26 per cent when the project was conceived. The promoters had also asked for guarantees and subsidies, which the State Government later turned down, the official said.

After the project was scrapped, the Government decided to implement the metro rail project for Bangalore. The Rs 5,747-crore project recently received clearance from the Public Investment Board of the Centre. The State Government is expected to contribute around Rs 1,800 crore, while the rest would be shared between the Centre and the financial institutions. The 33-km rail project will have seven km stretch of underground. The Defence Ministry has agreed to transfer around 102 acres of land under its possession for the project.

(This article was published in the Business Line print edition dated December 29, 2005)
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