'Mumbai-Pune Expressway revenues cross IRB Infra's upfront payment to government'

Is IRB Infrastructure Developers's cash cow project, Mumbai-Pune Expressway, headed for some legal trouble?

Possibly yes, as a group of anti-toll activists have initiated the process of approaching authorities to get the contract terminated.

For IRB, during the third quarter of 2016-17, the Expressway project earned 26%, or over a fourth, of the total revenues from the basket of 14 Built-Operate-Transfer (BOT) projects it has.

Excluding the toll revenue not collection during demonetization days, out of its total third-quarter revenues of Rs 517.6 crore, IRB collected Rs 137.2 crore from tolling the Expressway.

The group of activists, on Wednesday, lodged a complaint with the Anti-Corruption Bureau (Maharashtra) against the state authorities to get the BOT contract discontinued.

As per the written complaint, "...we had brought to the attention of authorities the fact that against an upfront payment of Rs 918 crore, the contractor for the said project had already collected about Rs 2,880 crore as of November 2016." Whereas the expected income from toll collection as per contracted cash-flow up to August 2019 is Rs 2,869 crore.

Adding Rs 43 crore for December 2016, the total collections would rise to Rs 2,923 crore.

"We had pointed out to the authorities therein that their act for failure to respond to us in November has led to undue gain and favour to the contractor by Rs 54 crore," Pravin Wategaonkar, a co-complainant, said.

Shrinivas Ghanekar, another complainant, said, "Secondly, the company would have collected additional toll income of around Rs 40-45 crore for the month of January. Thus, with each passing day, by the wilful act of omission to stop the toll collection rights on the Expressway, the authorities are allowing a wrongful average gain of about Rs 1.5 crore per day."

"Considering that the contractor has earned income expected to be earned in August 2019, already as of November 2016, the question of the project underperforming in generating toll income does not arise," said Vivek Velankar, a co-complainant.

The complaint reads, "The toll contractor may have deposited the reported toll income into the bank account as per the agreement with the designated banks and as such these lending bankers ought to be aware of the contractor having earned the total contracted income."

According to activists Vivek Velankar and Sanjay Shirodkar, chief minister Devendra Fadnavis, Minister for Public Works Department & Chairman of Maharashtra State Road Development Corporation (MSRDC) Eknath Shinde, MSRDC vice chairman and managing director Radheshyam Mopalwar and some unnamed public servants are responsible for allowing toll collection.

DNA Money tried reaching to MSRDC chairman Shinde and vice chairman-managing director R Mopalwar, but they were unavailable for their reaction.

Responding to queries raised, IRB Infrastructure Developers in a statement said, "In this matter, IRB has shared all relevant factual information with the respective authorities in state government. from time to time. Once again, we reiterate that toll collection on Mumbai-Pune Expressway is in line with the prevailing Concession Agreement."

According to a company spokesperson, the gross revenue assumed during the 15 years period needs to be calculated from the traffic numbers assumed by us in the bid submitted by taking into consideration the growth rate as well as tariff approved for the period by the government. If one takes them into consideration it will be clear that the project is likely to generate at best 15-16 % return over a period of 15 years after factoring interest expense, maintenance cost as well as the initial investment of upfront amount and four lane work capital cost on National Highway 4.

"This is very much in line with industry practice, taking into consideration the long-term risks associated with such projects. It is a well-known fact that such long-term projects of 15-year tenure need almost 8-9 years to break even itself. Hence assuming that the project's recovery is already done is completely wrong," read an IRB statement.