The GMR Group appears to be headed for trouble with the ministry of road transport and highways looking at the company's termination of the Rs 7,200-crore Kishangarh-Udaipur-Ahmedabad highway contract as a "unilateral" act not permissible under the agreement it signed with the National Highways Authority of India (NHAI).
Rohit Kumar, joint secretary in the ministry, told Mail Today that GMR had to give a "cure period notice of 90 days to NHAI before cancelling the contract". "This clause forms part of the agreement that the company has signed with NHAI." Singh added, "This unilateral cancellation of the contract is prima facie illegal and arbitrary. Legal action would be initiated in the matter."
However, the GMR Group spokesman claimed that "according to clause 37.2 of the agreement, the contract can be terminated with a short notice of 15 days". He said that the company had been "facing hurdles in implementing the project over the last 16 months due to the delay in clearances and we found it fit to give up the project. It is unfortunate."
The spokesman further claimed, "We sent a proper legal document in this regard to NHAI on December 21 and all legal procedures have been followed."
Despite the controversy, GMR is not averse to bidding for new NHAI projects . Besides, the company's Rs 400-km project to build the 178 km outer ring road in Chennai "is well on track", the spokesman said.
NHAI chairman R.P. Singh was not available for comments as he is reported to be on tour. GMR Infrastructure had informed the Bombay Stock Exchange on Monday that "GMR Kishangarh Udaipur Ahmedabad Expressways Limited, a subsidiary of the company, has terminated the concession agreement entered into with NHAI for six-laning of the 555-km Kishangarh-Udaipur-Ahmedabad highway".
The company had won the project in September 2011 through the international competitive bidding route. The project was supposed to have been completed through the public-private partnership model on design, build, finance, operate and transfer basis.
The termination also comes at a time when the government is trying to fast-track big-ticket projects to rev up the slowing economy. The government has just constituted a cabinet committee on investment headed by the Prime Minister to expedite all projects involving an investment of over Rs 1,000 crore and is hoping to send the right signal to investors.
"Going through the tendering process for major projects is a long drawn out process that stretches across several months and can even exceed a year. This termination, therefore, has set the clock back for the government's plans for the infrastructure sector," a senior finance ministry official pointed out.
Courtesy: Mail Today