Road builders can’t take toll now,pay later

Ministry has overturned decision by NHAI which would have allowed GMR to collect toll.

Written by Amitav Ranjan | New Delhi | Published: May 16, 2013 3:51:24 am

The law ministry has overturned a decision by the National Highways Authority of India (NHAI) which would have allowed GMR Infrastructure Ltd to collect toll now but pay the government later.

Allowing rescheduling of payment would open a “Pandora’s box” of similar requests from other companies,the law ministry wrote to the Ministry of Road Transport and Highways — under which NHAI functions — on May 9.

“…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,” the law ministry wrote.

“It may open a Pandora’s box to the other equally-situated persons who have agreement with the NHAI. Further,making change now in favour of the concessionaire (GMR) may affect other parties who did not participate in the tenders due to this clause,” it added.

Despite objections raised by Finance Secretary R S Gujral and Planning Commission Secretary Sindhushree Khullar,NHAI’s board had on March 26 approved GMR’s proposal for staggering a payment of Rs 32,508 crore so that the company would pay less in the initial years of the concession period and higher sums later while keeping the net present value of the premium unchanged.

Gujral told the NHAI board that the quantum and schedule of premium to be paid by GMR — as laid down in the contract signed after the open bidding — 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 observed that any change would mean “all existing contracts will be open to review and renegotiation”.

“Such whimsical changes in legally binding contracts are a poor reflection on the credibility of government and its agencies. Moreover,reopening a legally binding contract mitigates against the principle of sanctity of contracts and should not be resorted to on a case-to-case basis,” she added.

The NHAI board later sought “an appropriate public policy” from the road transport ministry. The ministry,while asking the law ministry for an opinion,was of the view that any change in policy should only be made prospectively.

Highway developers are sitting on 25 unfinished projects that are to yield Rs 98,115 crore in gross premium to NHAI. Besides GMR,NHAI received similar requests for staggered payment from GVK,IRB Infrastructure and Ashoka Buildcon among others.

Road Transport objected saying these were “done deals” and should not be renegotiated. NHAI argued that this would mean the termination of most projects.

The projects of GMR,GVK and IRB involve six-laning where toll collection starts from the four-lane stage. Staggering the premium over the concession period helps companies by reducing their cash outgo in the initial years when they incur construction costs.

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