Now, GVK walks out on highway project

Days after infrastructure major GMR walked out of one of the largest highway projects, another leading player GVK, too, has terminated a contract with the National Highways Authority of India (NHAI).

GVK Power & Infrastructure has pulled out of four-laning of the two-lane Shivpuri, Dewas highway in Madhya Pradesh that was awarded to it in January 2012.

The 332.46 km highway was offered on a concession period of about 30 years and was to be constructed in 30 months.

As part of the agreement, GVK had promised to pay the NHAI about `3,000 crore, starting with Rs190 crore in the first year. The payment was to be increased 5% every subsequent year.

However, the company has now decided to walk out of the contract under Clause 34.8 of the concession agreement.

While the company officials were not available to ascertain the reasons for the termination of the contract, sources said the delays in getting approvals coupled with the viability issues were the key reasons for GVK’s decision.

The NHAI, which has been at the receiving end with two infrastructure majors terminating their agreements, is now said to be preparing to handle the issues firmly.

While the authority is said to be mulling banning companies that are terminating the agreements abruptly, a decision is yet to be taken on the issue.

“It is not easy for the NHAI to impose a ban since each project is being executed through a special purpose vehicle and each project has its own issues. It is a fact that there have been lapses in the process of execution of the projects. The NHAI is not completely involved in getting all the required approvals and the developers are left to fend for themselves,” an industry source said.

The delays are discouraging banks and other institutions from participating in the projects, the source said.