Andhra cancels Maytas metro deal

The Andhra Pradesh government has cancelled the concessionaire agreement for the Rs 12,132-crore Hyderabad Metro Rail Project, a showpiece public-private partnership, awarded to Maytas Infra Ltd, the listed company run by Teja Raju, older son of Satyam Computer Services founder B Ramalinga Raju.

Announcing this today, Municipal Administration and Urban Development Minister Anam Ramnaryana Reddy said the deal was cancelled because the company failed to achieve financial closure, although three months had lapsed from the March deadline.

Reddy clarified that the government will still take up the project and will announce a detailed plan on July 13.

Maytas Infra Chairman K Ramalingam met Chief Minister Y S Rajasekhara Reddy recently, but failed to give an assurance on the financial closure or performance guarantee.

Maytas had paid the state government Rs 11 crore as an initial amount and provided Rs 60 crore as a bank guarantee after signing the concessionaire agreement in September last year. Under the agreement, the company forfeits this money if the projec fails to achieve financial closure by March 17, 2009.

Maytas Director Ved Jain told Business Standard he was not aware of the development. “Let the official communication come, then we will respond,” he said. The company did not reply to a questionnaire.

Maytas has, however, completed the topographic surveys, alignment designs, architectural layouts of stations and preliminary design for civil work. N V S Reddy, managing director, Hyderabad Metro Rail Ltd, the company implementing the elevated rail project, said these designs would be used when the project is executed.

The Hyderabad metro project attracted national attention when the Maytas-led consortium bagged it by offering the government royalty of Rs 30,311 crore over a contract period of 35 years. The consortium comprising Maytas, Nava Bharat Ventures Limited, Italian-Thai Development Plc and IL&FS also rejected Rs 4,800 crore offered as viability gap funding (government compensation for the difference between cost and revenues)

This meant that the state government would not only get the 71-km metro free of cost but would also receive Rs 1,240 crore (calculated at present value at 13.5 per cent a year) by simply giving the concession to a private consortium.

Although the build, operate and transfer (BOT) project was considered a model for other metro projects Delhi Metro Rail Corporation Limited Managing Director E Sreedharan criticised the deal, saying it depended on 296 acres of prime land being made available to Maytas for commercial exploitation. “This is like selling family silver,” he said in a letter to Planning Commission Deputy Chairman Montek Singh Ahluwalia.

Maytas Infra’s troubles began on December 15 last year when Ramalinga Raju announced that Satyam would acquire 51 per cent of the company along with 100 per cent in unlisted Maytas Properties for about Rs 8,000 crore. Though the proposal was withdrawn following strong shareholder protest, the circumstances led to Raju making a sensational confession to long-term fraud in Satyam Computers on January 7.