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IDFC’s decision comes about two years after the government decided to terminate the contract awarded to DSC Ltd, following allegations of financial mismanagement and inconvenience to commuters.
On Monday, IDFC informed the high court here it would seek time till January 27 to strike a deal with the National Highways Authority of India (NHAI) and the roads ministry. IDFC, the lead lender among a consortium of four bankers, had written to NHAI to allow it to substitute DS Construction, which had won the right to develop the road project.
IDFC did not respond to a questionnaire sent by Business Standard.
Lenders to Delhi-Gurgaon Expressway, a showcase public-private partnership road project that cost about Rs 1,000 crore in 2008, would have had to take a haircut of about Rs 1,400 crore if the government took over the project, as it planned to pay only Rs 175-200 crore as termination charges. If lenders take over the project, the four financial institutions in the consortium — Punjab National Bank, Oriental Bank of Commerce, State Bank of Bikaner & Jaipur and IDFC — will not lose money.
The consortium of lenders has an exposure of Rs 1,600 crore to the project. “In the court today, IDFC mentioned it needed some time to discuss the proposal with NHAI. The high court has set January 27 as the date for the next hearing,” said a spokesperson for DSC Ltd. Following NHAI’s decision to terminate the contract, NHAI and DS Construction have been embroiled in a legal tussle.
“We have received their letter suggesting the lenders will take over the project and there are lots of issues to be studied. DS Construction had claimed more than Rs 900 crore for change of scope of work and we need to find a solution,” said a senior NHAI official.
The Delhi-Gurgaon Expressway was the first project to be given on a premium by the government. However, traffic congestion at toll gates and allegations of mismanagement saw the case landing at court. The government had planned to ask the attorney general to represent the ministry and pursue a quick resolution to the matter.
NHAI has given the lenders two alternatives — removing the toll gates at the Delhi exit or creating an elevated expressway for commuters to Gurgaon. “The lenders are likely to opt for removal of the toll gates to reduce the inconvenience to passengers rather than investing an additional Rs 500 crore,” said an official. NHAI wants to remove the first toll gate on the Delhi side, which has caused inordinate delays to commuters, and push back the toll gates to two locations after Gurgaon, making commute on the Delhi-Gurgaon expressway toll-free.
According to a KPMG study commissioned by NHAI, as of September 2013, about 250,000 passenger cars crossed the toll gates daily, with a large number of these commuting up to Gurgaon. However, this estimate has been disputed by DSC.
Earlier, NHAI had threatened to terminate the contract due to frequent complaints of delays at the toll plaza. It had also found irregularities in the manner in which DS Construction raised loans from financial institutions.
NHAI had awarded the build-operate-transfer project to Jaypee DSC Ltd in 2002, but Jaypee Group exited the project in 2004. While the concession period started in January 2003, the project was completed in 2008. The company, now called Delhi Gurgaon Super Connectivity Ltd, owns the rights to operate the expressway and collect toll till 2023.
Until July in 2013, the developer collected Rs 970.83 crore as toll; NHAI was paid Rs 77.51 crore as part of the revenue-sharing plan. “DS Construction made all the money they wanted and they have nothing to lose. If you see, none of their projects are doing well and they have more of a short-term approach through which they look to make money,” an expert said on condition of anonymity.
