Hyderabad: L&T, Telangana stare at fresh tussle over execution of metro rail project

HYDERABAD: Engineering giant Larsen and Toubro and the Telangana government could be headed for another faceoff over execution of the Rs 16,375-crore metro rail project in Hyderabad.

L&T Metro Rail, which has suffered time and cost overruns, both before and after the formation of Telangana, has a July 2017 deadline for completing the 72-km metro rail project which will crisscross Hyderabad in three corridors.

Top officials in the Telangana government and L&T executives confirmed that the infrastructure firm has sent a fresh request to the state government seeking extension of construction deadline by at least 18 months and compensation for various impediments.

The project, for which a concession agreement was signed in July 2012, has seen a cost overrun of Rs 3,000 crore, taking the projected cost to nearly Rs 20,000 crore.

L&T has reportedly raised these concerns with the state government in the past.

Confirming submission of a fresh request to the Telangana government on measures to make the project financially viable, L&T Metro Rail's chief executive officer VB Gadgil told ET "the government is currently looking into our request and the discussions are going on".

A spokesperson for L&T said delays in finalisation of alignment issues and providing continuous right of way in prime areas, coupled with many other reasons beyond the control of major stakeholders have forced the company to seek more time.

However, a senior Telangana official, who did not want to be named, said, "The state government has given the right of way for most portions of the metro rail project except a stretch of 4-km in the old city and hence L&T's request for compensating for time and cost overruns was rejected. We have asked them to expedite the works and complete the project on schedule."

Another bureaucrat said the state government is against accepting L&T's request for compensation as it could potentially culminate in complications on penalties, which in turn could lead to modifications to viability gap funding, among other problems.

A person close to the development said an independent engineering agency has now been asked to examine the technical and commercial factors and advise both parties on the way forward. "Approaching the independent engineer on any dispute between the partners is just a step before moving towards a prolonged arbitration process," he said.

Claiming that the Telangana government did not refuse L&T's request, a spokesperson for the state government said, "It (Telangana government) has asked the independent engineer, Louis Berger, to review the request and give them the detailed report."

L&T, which is building the public-private-partnership project with viability gap funding from the central government, was asked by Telangana's first chief minister, K Chandrasekhar Rao, in 2014 to stall work at certain key locations and consider changing alignments.

L&T Metro Rail, which in September 2014 had threatened to pull out of the project expressing concerns over the project's financial viability, was recently asked to resume work at the locations without any change in alignment.