Finding it difficult to close road contracts undertaken in the build-operate-transfer mode due to delays construction companies are in a quandary over National Highway and State road projects. They are now looking at new norms that place emphasis on the equipment, procurement and construction (EPC) approach.
While BOT projects expect the successful concessionaire to raise funds, execute projects and manage them over the concession phase of 20-30 years, an EPC order is merely a contractual obligation to execute the project. Interactions with some infrastructure companies show that the recent instance of GMR Infrastructure terminating the contract with NHAI for a major road project may seem like an isolated case.
These, though, are not just isolated instances, say sector players, adding that several companies are on the edge. Similar is the situation with GVKÂ’s Expressway in Madhya Pradesh.
The company has scrapped the project in MP because of various hurdles. The Chairman and Managing Director of IVRCL, E Sudhir Reddy, told a business newspaper that even if a BOT project developer manages to complete 98 per cent of the work as per the contractual obligation and two per cent is struck due to hurdles, it is still considered a delay and the concessionaire will not be able to commission the project.
The contractual terms are always loaded in favour of the NHAI and, invariably, the developer is seen as a defaulter. While the NHAI has the power to make it tough for the developer, the banks pressure the contractor for delays beyond the latterÂ’s purview, and yet he is penalised. In a contract, both parties need to have equal rights, said another company executive.
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