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Larsen & Toubro faces the prospect of cancellation of one of its biggest road building contracts worth almost 3,000 crore as its client GMR Infrastructure has decided to terminate the toll road project for National Highways Authority of India (NHAI). GMR Infrastructure has pulled out of NHAI's biggest road project being set up at a cost of 7,700 crore for the six-lane Udaipur-Kishangarh-Ahmedabad segment of the national highway, citing land acquisition, environmental clearance and toll notification as some of the issues.
Source in L&T's engineering, procurement and construction business, told a leading business newspaper that the company has not received any official communication from GMR and the order continues to be on its books. Analysts and sector officials, however, fear that cancellation is imminent, given GMR's decision to not to go ahead with the project.
In 2011, GMR Infrastructure had bagged NHAI's biggest project, the Kishangarh-Udaipur-Ahmedabad highway, by quoting an aggressive premium of 636 crore. The winning bid had raised quite a few eyebrows then with analysts speculating the viability of the project, considering the premium.
Subsequently, GMR placed two orders with L&T in December 2011 and August 2012 totalling 2,809 crore for construction of the road project, which are now likely to be cancelled. A GMR spokesperson declined to comment on whether they have officially terminated the order to L&T.