Law ministry does a U-turn on decision to renegotiate toll contract with GMR Infra

Legal affairs volte face has stumped even the administrative road transport ministry. Interestingly,the DLA has taken an acquiescent position without referring to its earlier opinion dated May 9…, road transport secretary wrote to the Prime Ministers Office.

On May 9,the law ministry reversed an NHAI board decision to allow GMR to reschedule a payment of Rs 32,508 crore as it could open a Pandoras box of similar requests from other companies.

When the agreement has been made,signed by both the parties,it is not advisable for renegotiation of the contract which is neither desirable nor permitted in the normal course and to make change in it at the belated stage, Deputy Legal Adviser Mahesh Tyagi wrote. It may open a Pandoras box to the other equally-situated persons who have agreement with the NHAI, he added.

Law ministrys July 7 opinion has helped newly-appointed road transport minister Oscar Fernandes to push for revising the payment contracts not just for GMR but 22 other road projects. His push is to allow their promoters to pay lesser premium to the government in the initial years than what was agreed upon.

Last week,Fernandes sought finance minister P Chidambarams advice on the policy proposal as the crisis in the highway sector is more severe at this stage than ever and requires careful consideration and decision from the government.

Surprisingly,the Cabinet secretariat refused to admit the same proposal last month because of DLAs May opinion. It sent back the note for Committee of Secretaries saying that in view of the comments of the Department of Legal Affairs,convening of any CoS meeting may not serve any useful purpose.

DLAs opinion was taken in May because the NHAI board in March approved GMRs request for staggering the payment despite stiff opposition by finance secretary RS Gujral and Planning Commission secretary Sindhushree Khullar at the board meeting.

GMR had sought payment stagger to pay less in the initial years of the concession period and higher sums later while keeping the net present value of the payout unchanged.

Gujrals objection was that the quantum and schedule of premium payment was a clear bidding parameter. Varying the payment schedule at this belated stage implies departure from the legally binding contract and there could well be a series of requests for rescheduling premia payable so as to make schedules back-loaded, he said.

Khullar said any change would imply that all existing contracts are open to review and renegotiation.

Transport ministrys decision was that any policy change should only be prospectively as GMR-like contracts were done deals and should not be renegotiated.