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Fund crunch forced GVK, GMR to leave projects, says NHAI

New Delhi, Jan 17, 2013, DHNS:

GMR terminates Rs 5,700 cr project

The National Highway Authority of India (NHAI) on Thursday said that infrastructure companies GMR and GVK are walking out of mega road contracts after failure to arrange funding for those projects, and not on account of delays in environment clearance as cited in their notices.

"GVK project in our view requires an equity of Rs 1,500 crore. GMR project may require an equity in the order of Rs 2,000 crore. In the present scenario, I think, they are over-leverged financially. For them to raise this kind of equity is not possible,” said Chairman of NHAI R P Singh on the sidelines of a FICCI conference on “Accelerating the Development of Highways in India”.

He said that arranging huge private equity is a major problem for these two companies as these are much bigger projects than what we earlier awarded on BOT (build, operate, transfer).

He was referring to two projects of the two groups that they terminated on different grounds.
It may be noted that Bangalore-based GMR Infrastructure terminated contract for the Rs 5,700 crore Kishangarh-Udaipur-Ahmedabad Expressways with NHAI on grounds of delays in environment clearance.

GVK pulled out of Shivpuri-Dewas Expressway in Madhya Pradesh on the citing "change in law" after a Supreme Court order made Environment Ministry permission mandatory even for extraction of minerals in area below 5 acres.

Singh said that the challenge of building the highway network were manifold. “For
undertaking 8000-9000 kms of roads, roughly Rs 91, 000 crore was required. If a third of this comes from equity, the balance Rs 60,000 crore would have to be debt-financed. Are banks in a position to finance such a large amount in a non risk-free situation?” he asked.

He said existence of multiple stakeholders was compounding matters when it came to clearances for such projects. While the Planning Commission and the Department of Economic Affairs should lay down policy guidelines, the nitty-gritty of implementation should be left to NHAI; its board must have full authority, he said.


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