NHAI writes to defaulting developers ahead of retendering 20 road projects

04 November 2017

National Highways Authority of India (NHAI), which had terminated a number of highway development projects citing defaults by project concessionaires, has now asked the defaulting developers to make representations and give reasons for project delays in order to escape getting debarred from bidding for new projects.

The projects of companies such as L&T and Hindustan Construction Company were terminated as the concessionaires defaulted on their contractual agreements, including physical milestones for completion.

With the ''non-eligibility'' period for these firms set to expire, NHAI has written to the developers to give reasons for revoking their non-eligibility. The NHAI, which is planning fresh bids for some of these projects, has asked these developers to make representations before 6 November, for a possible review.

Reports quoting NHAI chairman Deepak Kumar said the authority has written to the developers to give reasons for revoking the non-eligibility. The NHAI is planning fresh bids for these projects.

However, since many of these projects are under arbitration, it is not clear whether the original developers would still have any interest in the projects, as for many of these developers the defaults were due to reasons that are not related to the terms of the contracts.

The projects that were terminated include those of Larsen &Toubro, Hindustan Construction Company, Essel Infra Projects, MBL Infra, among others. Both public-private partnership projects - including BOT toll and hybrid annuity - and conventional EPC contracts were among the ones cancelled by the NHAI.

In a statement, L&T said, ''L&T IDPL, a subsidiary of L&T, terminated a concession for the Pimpalgaon-Nashik-Gonde project due to force majeure events arising from law and order issues as per provisions of the concession agreement, after completing the project. In our opinion, the termination cannot be treated as a concessionaire event of default. The matter is sub-judice as it is under arbitration. As per the NHAI directions, the matter has been represented and a decision is awaited from them (NHAI) shortly.''

A Financial Express report quoting former road secretary Vijay Chhibber as saying that in many of these contracts the authority and not the contractors is at fault, adding that at least in half of the terminated projects, the road transport ministry or the NHAI has been at fault.

The move, however, is positive for the sector and will help in moving past stuck/ stalled projects and in a way act as a deterrent for any future aggressive bidding by the developers.

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