Change In Guard Threatens Ril'S Goa Water Project

Goa's Panjim water project has hit a road block and can even be terminated, despite the state government shortlisting Reliance Industries Ltd (RIL) as the lowest bidder for the project.

Official sources said the state government is currently mulling the idea of inviting revised bids for the Rs 400 crore project. The government has, however, made no formal notification of either terminating the project or inviting revised bids.

The prequalification was made early this year and subsequently financial bids were shortlisted in April. The project was offered on a build-own-operate-transfer basis on a 30-year concession period with a minimum supply of 160 million litres of water per day in the form of pay or take arrangement.

The inability of the state to take a decision on the project stems from the repeated political changes that took place in the Goa government, with sections opposed to privatisation of water supply.

Reliance Industries quoted Rs 20 per kilo litre of water, around 70 per cent lower than the competing bidder's price

When contacted, Reliance declined to make any comments or provide answers to a faxed questionnaire.

Instead, a company spokesman sent a terse one line reply which stated, "It is the company policy not to comment on projects under bidding or development."

But Reliance has started making attempts to salvage the project and has indicated that it will participate in case of a revised bid.

It had sought an escrow cover and a state government guarantee for payments to the BOOT operators. The state government has taken steps to freeze guarantees after shortlisting the bidder.

This was made in order to make the project bankable on a limited recourse basis. This implied that project creditors would have recourse only to the revenues and assets of the project and would not have any corporate guarantees from Reliance.

This is the second instance where projects are facing political risks. In the Rs 700 crore Pune water supply project, the tenders were unilaterally terminated by the Pune Municipal Corporation, despite a consortium comprising of Zoom Developers Pvt Ltd, Hanjim Engineering of Korea and Peter Oates of UK being prequalifed and emerging as the lowest bidders.

Though financial institutions have been consistently arguing for compensation by the project originators to recover costs incurred for making pre-bid preparations, feasibility studies and consultants fees, sources said the bidders would be unable to take a legal recourse, on account of a clause in the bid documents allowing for unilateral termination without assigning any reason.