NHAI to put GVK's Madhya Pradesh project for rebidding

After burning its hand with GVK Transportation, the National Highways Authority of India (NHAI) will soon put the Shivpuri-Dewas road project in Madhya Pradesh for rebidding. The project, first awarded to GVK Transportation in January 2012, was terminated by NHAI due to the company's failure to achieve financial closure for the project.

The project value, Rs 2,815 crore at that time, would now be Rs 4,000 crore owing to escalation in input costs, a senior NHAI official said. Even before NHAI terminated the contract, GVK had walked out of the project, citing delays in getting various clearances.

Bids would be invited again on a build-operate-transfer (BOT) mode, for four-laning the 333-km section. NHAI is hopeful there would be good response for the rebidding, because the stretch has good traffic, which means enhanced revenue potential for private players. Under BOT, a developer builds a project and operates it for a specific time period to recover its investment and earn a profit before transferring it to the government at the end of concession period, usually 20 or 30 years.

According to people close to the development, the company has renewed its bank guarantee for another year and a mutual decision between the company and NHAI was expected to be finalised soon.

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 the Authority not to encash the guarantee till disposal of the case.

NHAI had served termination and debarment notices on GVK Transportation a few months ago for its failure to tie up funds for the project and issued a show-cause notice in May this year, saying there was "no merit or cogent ground" in the firm's submissions for non-achievement of financial closure.

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 five hectares as a change of law since it was done through a mere clarificatory order of the Supreme Court.

A senior official in NHAI said the authority was forced to issue the two notices since it could not proceed with development of the expressway project, which is part of NH-3 in Madhya Pradesh. In a separate notice on debarment, NHAI had said earlier this year that both the special purpose vehicle, GVK Shivpuri-Dewas Expressway Pvt Ltd, and GVK Transportation should furnish their replies on why they should not be debarred from executing other NHAI projects for a period of two years.