After GMR, it is the turn of Hyderabad-based infrastructure company, GVK, to pull out of a road project in Madhya Pradesh.
The company today said in a communication to the stock exchanges that it terminated the concession agreement it had executed with the National Highways Authority of India (NHAI).
The road project was the biggest project in GVK’s transportation portfolio. It was awarded to the company in January last year, and was supposed to convert Shivpuri Dewas section of National Highway 3, into four lanes, involving the 1,329.84 lane kilometers.
“We had sent a notice of termination to NHAI. That period has now ended,” said a company official who refused to be identified. Apart from this project, the company has three more projects between Jaipur-Kishangad, Deoli-Kota, and Bagodara-Vasad.
The company did not offer any further comments beyond the fact that the termination is in line with the clause 34.8 of the concession agreement. The clause, according to experts, says that a concessionaire or the developer of a project, can terminate the agreement if the nodal agency does not demonstrate enough initiative to full the responsibilities that are a part of the agreement. Some of the responsibilities of NHAI include secure the land required for the project, as well as obtaining clearances like environmental clearance, forest clearance and others.
The road project, according to GVK on its website, is part of a vital trade corridor connecting Western and Central India to Northern India. “The project road passes entirely through Madhya Pradesh, carrying predominantly long distance freight traffic and is expected to offer high growth potential for commercial traffic,” the company said. The project has a concession period of 30 years including a construction period of two-and-a-half years.
This is the second such project to suffer, after a developer refused to go ahead with it. Recently, GMR Infrastructure also took the same stand and terminated a contract with NHAI to build a highway connecting Kishangarh, Udaipur and Ahmedabad. The project was won by the company after quoting a huge premium of around Rs 636 crore to NHAI, in reverse to the practice of getting viability gap funding from the nodal agency for roads.
Analysts say that companies do not want to stick to projects now and would rather prefer to exit. “Earlier too these problems existed like lack of land, but they never surrendered them. Now, they want to use such reasons to exit,” said a New Delhi-based sector analyst.
A banker however hailed the move by companies to surrendering projects is a good development. “The agency has been seeking bids for many unbankable projects where the land was not completely acquired or the clearances obtained. This will be a strong signal to the agency to seek bids for, and award projects which are completely bankable,” he said.
