Chandra’s firm gets ₹157 crore to complete KMP e-way project
This is the best way to save project, says additional chief secretary (finance)
CHANDIGARH: Giving a lease to life to the financially embattled Essel Infraprojects of Rajya Sabha member Subhash Chandra as well as the unfinished Kundli-Manesar-Palwal (KMP) expressway project, the BJP-JJP government in Haryana has lent ₹157.5 crore to Essel’s company KMEL — the concessionaire for the 83km Kundli-Manesar section of the expressway — to complete the stretch by May this year.
Subhash Chandra is an independent MP from Haryana, who won due to the support of the ruling BJP. The amount has been lent by Haryana State Industrial and Infrastructure Development Corporation (HSIIDC), the executing agency for the project on build-operate-transfer (BOT) basis.
Industries department officials said of ₹157.5 crore lent to Essel, about ₹74 crore would be utilised by the concessionaire to complete punch list works (a list of tasks to be completed at the end of the project). The remaining ₹83 crore has been used for debt servicing so that the project does not become a non-performing asset (NPA), officials said. The punch list included road safety works such as completion of work on provision of unlined roadside drains, lining of roadside drains, construction of rest areas, completion of fencing works, stone masonry works in cross-drainage structures, stone pitching and plantation of avenue trees among others.
‘SAFEGUARDS IN PLACE’
Additional chief secretary (finance and industries) TVSN Prasad said the money given to Essel was not a loan, but provisional annuity. “Ours is a trailblazer model for setting NPAs right. We have put in place adequate safeguards to ensure that financially troubled Essel Infraprojects uses this money only for project completion. The ₹74 crore has been put in an escrow account (an account opened in a bank where funds are accumulated for specific disbursements). Also, the lead bank has given an undertaking that funds will not be released until the HSIIDC gives a go-ahead,” he said.
“The loan will carry compounded interest at the rate which the HSIIDC is borrowing loan plus 3% spread and will be recovered from the proceeds of the annuity of the concessionaire. So, the concerns over the given money being misappropriated by the concessionaire have been addressed,” Prasad added.
He said it was important to ensure the project does not get derailed and the government gets the remaining works executed by the concessionaire. “In case the government decides to terminate the concession agreement on account of occurrence of event of default on part of the concessionaire, the HSIIDC would have to take over the burden of 80% of the concessionaire’s debt. Arbitration is already going on with the previous concessionaire. So, this was probably the best way to save the project,” he added.
ORIGINAL PLAN WAS TO LOAN ₹225 CRORE
Initially, the government had devised a ₹225-crore bailout for Essel after the board of HSIIDC directors took a decision in this regard citing “public interest”. However, the decision was modified following public criticism. The 136km expressway was thrown open to the public by Prime Minister Narendra Modi in November 2018. However, the project was granted a provisional completion certificate then.
As per the concession agreement, all punch list items were to be completed by concessionaire within 120 days from the date of issue of provisional certificate.
When the concessionaire defaulted, the HSIIDC issued a preliminary notice of termination to Essel for material breach of provisions of the concession agreement on account of its default in completion of punch list works. Material breach meant failure of performance under the contract. However, the HSIIDC board of directors in August 2019 took a view that the corporation should provide a loan of ₹225 crore to Essel in view of larger public interest.