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An IDFC Ltd-led consortium has taken over the Delhi-Gurgaon Expressway project, the flagship public private partnership project, which has been in trouble for the past three years. The lenders would, however, have to look for new operator within three months.
The Delhi High Court on Wednesday approved a settlement among IDFC, the National Highways Authority of India (NHAI) and DSC Limited, paving way for IDFC to take over the project in what is the first instance of a group of lenders taking over an expressway project. The settlement also ensures that more than 200,000 commuters travelling between Delhi and Gurgaon do not need to pay toll. The free ride would be at the cost of those coming from the Manesar side to Delhi and Gurgaon who would now have to pay 80 per cent more than the existing toll.
The expressway was the first road project in the country to be bid out on premium. Though currently, a number of projects given out on premium are in trouble due to aggressive bidding, in the case of Gurgaon expressway, more than expected traffic flow had caused traffic jam at the toll gates. "Sirhol toll plaza at Km. 24 shall be removed and the user public will not have to pay toll for commuting between Delhi and Gurgaon. The lenders or the substitute concessionaire are allowed to collect toll only at km.42 Toll Plaza (Kherki Dhaula) by combining the rates at Km.24 Toll Plaza and Km.42 toll Plaza, but the local traffic rates and discounts are same as earlier applicable at Km.42 Toll Plaza," the road ministry said in a statement.
A spokesperson for IDFC said the lenders have agreed to assume the receivership of the project immediately. IDFC will remove the toll plazas located at the Delhi-Gurgaon Expressway and the Indira Gandhi International Airport as part of the settlement plan.
The new toll rates would partially make up for the loss in revenue as IDFC stood to lose more than 60 per cent of the revenue generated on the expressway. Currently, the Delhi-Gurgaon expressway has three toll gates — a six-lane toll plaza at the Indira Gandhi International Airport (IGAI), an 18- lane toll plaza at Kherki Dhaula and a 32-lane toll plaza at Sirhaul. According to toll collection figures available for 2012-13, the toll plazas at Sirhaul and IGAI loop collect Rs 120 crore of the Rs 198 crore collected on the expressway.
According to the settlement plan, apart from the removal of toll gates, DSC Limited will have to bear any open-ended liabilities or liabilities that could arise in the future that were not settled in the past. DSC also had to withdraw its claim of Rs 990 crore for a change in the scope of work it claimed from NHAI. Change in the scope of work is additional work undertaken by a concessionaire during the construction phase.
“This is a good precedent. As the concessionaire, if you do not do your job well, then the lenders have to forcefully exert their rights as provided in the concession agreement,” said Vishwas Udgirkar, senior director at Deloitte. The lenders are likely to bring in someone to run the operations. "But the main challenge that IDFC will have to face is raising the toll rate at the other toll plaza. There could be some protests."
The high court will now hear a plea by South Delhi Municipal Corporation regarding their concerns on collecting municipal tax on February 21. Since the corporation collects toll from commercial vehicles entering the city, it wants the toll gates to remain operational.
IDFC is the lead lender amongst a consortium of banks including Punjab National Bank, Oriental Bank of Commerce and State Bank of Bikaner and Jaipur. If NHAI had terminated the project, these lenders - who have an exposure of Rs 1,600 crore in the project - would have had to incur a combined loss of Rs 1,400 crore, as NHAI would refund only Rs 175-200 crore. This prompted IDFC to start negotiations with the government.
Meanwhile, some 600 employees of the project are likely to lose their jobs as IDFC is set to retain only 400 of the existing 1,000. Sources have also indicated that a new company has been formed to undertake the operations of the expressway. The expressway was the first project to be awarded on a premium by the government, in 2002. However, traffic congestion at the toll gates and allegations of financial mismanagement against DSC saw the case landing at the court. NHAI had sent a termination letter to the concessionaire in 2012 and maintained that the lenders could take over the project if it removed the toll plaza.
