The country’s first monorail corridor, under construction for nearly eight years now, has run into arbitration due to disputes between the contractor and the state over the project cost.
While the contractor is claiming cost escalations and blaming the state for delays, the latter is refuting the claims, looking to instead levy penalties on the contractor for missing deadlines. The Mumbai monorail project is being implemented by a consortium of India’s Larsen & Toubro and Malaysia’s Scomi Engineering on an engineering procurement contract model, where the government makes payments to the contractor in stages as per construction work.
“Both Larsen & Toubro and Scomi have separately submitted claims for cost increases in the project saying there has been a substantial delay from the government’s side, the contractors did not get land for the project on time as promised, and had to make several design changes due to unforeseen circumstances,” said a senior official from Mumbai Metropolitan Region Development Authority (MMRDA), in-charge of the project.
However, the MMRDA intends to impose liquidated damages on Larsen & Toubro and Scomi as per the contract agreement, considering there has been a significant delay in the project, he added. Liquidated damages refer to the total amount of compensation, as specified at the time of contract formation, that the aggrieved party is liable to get in the event of a breach in contract.
The MMRDA had originally expected to complete the 19.5-km monorail corridor, snaking its way from Chembur to Jacob Circle in Byculla through Wadala, by 2011. The first phase of the project, an 8.8-km line from Chembur to Wadala, was opened for public use in February 2014. Authorities had hoped the second phase from Wadala to Jacob Circle would be completed within a year from then, but the rest of the route, which officials hope will boost the dismal ridership, is still underway with even the structural work yet to be completed.
The contractors and MMRDA had originally estimated the project cost to be Rs 2,700 crore for the entire line, amounting to Rs 138.5 crore per kilometre.
“It is difficult to say at this stage by what extent the cost is likely to be estimated. Larsen & Toubro and Scomi are now jointly submitting their claims to the arbitration committee. The MMRDA will also explain its stand. The arbitration committee will then look into what delays have happened on whose account, and arrive at the cost that is to be borne by the two parties,” the senior bureaucrat said.
Until now, the MMRDA has paid about Rs 2,000 crore to the contractor. The Maharashtra government is already in arbitration for one of its recent showpiece projects, the city’s first Metro corridor from Versova to Ghatkopar, where the Reliance Infrastructure-led consortium has claimed cost over-runs of Rs 1,935 crore.
However, while the Mumbai Metro project, implemented on a public private partnership model, is already under legal arbitration, the arbitration for the Mumbai monorail project is at a more preliminary stage.
According to MMRDA officials, for now, it is a committee of experts arbitrating the dispute. The committee consists of retired officials from the public works department, and with an engineering and finance background. The arbitration process started about two months ago.