Road project cost jumps as NHAI invites fresh bids

The National Highways Authority of India (NHAI) has, after a delay of almost three years, invited bids for the Shivpuri-Dewas road project in Madhya Pradesh that was earlier awarded to GVK Transportation.

Rebids have been called in three packages in the design, build, finance, operate, transfer (DBFOT) model at Rs 3,500 crore. When the contract was awarded to GVK Transportation in January 2012, the value of the project was Rs 2,815 crore, according to a senior NHAI official.

The project is for widening 333 km of the Shivpuri-Dewas section of NH3 to four lanes. It will be executed in three parts: Shivpuri-Guna at a cost of Rs 849 crore for 97.7 km, Guna-Biaora at Rs 1,074 crore for 93.5 km and Biaora-Dewas at Rs 1,609 crore for 141 km. In the DBFOT model, a developer operates a road project for a specific time to recover investment and earn profits before transferring it to the government.

The government is planning to tender out smaller stretches of highways to save time and avoid delays.

“It is always easier to manage award of small stretch of highways, rather than a big one. This will also ensure speedy execution of the project,” a senior official from the roads ministry said.
 

The project was first awarded to GVK Transportation in January 2012 but was later terminated by NHAI due to company’s failure to achieve financial closure for the project. However, even before NHAI terminated the contract, GVK had walked out of the project citing delays in getting various clearances.
 

GVK had moved the High Court to restrain NHAI from encashing its bank guarantee. The Court directed both to decide the matter through an arbitration process, which is now underway and also asked NHAI to keep in abeyance encashment of bank guarantee till the disposal of the case. 
 

Meanwhile, the company has renewed its bank guarantee for another year and the case is under arbitration now.

NHAI had served termination and debarment notices on GVK Transportation for its failure to tie up funds for the project and issued a show-cause notice issued in May this year telling the company that there was “no merit or cogent ground” in the company’s submissions for non-achievement of financial closure and fulfillment of other condition precedents. In the notice, NHAI had said the company had unilaterally terminated the agreement with the government for the project in January 2013 on the grounds that there was a change of law (force majeure) for environment clearances. NHAI, however, said it did not consider the requirement of green clearance for lease of less than 5 hectare area as a change of law since it was done through a mere clarificatory order of the Supreme Court.