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Maytas out of Metro Rail project - Sathish - 07-08-2009

HYDERABAD: Nearly four months after the Maytas Infra-led consortium failed to achieve financial closure and give performance guarantee, the state government was on Tuesday forced to end its unprecedented generosity and cancel the concession agreement with the group on the Rs 12,132-crore Hyderabad Metro Rail project.

"Chief Minister Y S Rajasekhara Reddy reviewed the situation today morning with the officials and decided to terminate the agreement," municipal administration minister Anam Ramnarayan Reddy announced to the media on Tuesday. A Government Order (GO) terminating the concession agreement between Maytas Metro Limited and the state government was issued late on Tuesday evening.

"We waited this long because Maytas had promised to give Rs 30,000 crore to the state, an offer that was not made by any other consortium. Because of this, we gave them time till July 6 though the deadline expired on March 17. Maytas chairman K Ramalingam met the chief minister on Monday evening and sought some more time which was rejected by Rajasekhara Reddy," the minister said.

With Maytas finally out of the way, the state government is now desperately exploring alternatives to put the jinxed project back on the rails whose execution plunged into further uncertainty due to the fact that Maytas Infra is promoted by the Sayam scam-tainted B Ramalinga Raju family. On the plus side, the state has Rs 71 crore (bid security amount of Rs 60 crore and bid offer amount of Rs 11 crore) which Maytas has forfeited for not acheiving financial closure. "The chief minister will hold a meeting on July 13 and take a decision as to how to move forward on the project," Ramnarayan Reddy said.

Among the options that are open is central government-state government joint project. The union urban development ministry headed by S Jaipal Reddy is pushing for the state to take up this option on the lines of the Delhi and Bangalore Metros. This would imply the centre and the state having an equity of 25 per cent each and Jaipal Reddy has said on many occasions in the last few weeks that the centre would fund the project under the Jawaharlal Nehru Urban Renewal Mission (JNNURM). The remaining 50 per cent would be raised through funding from financial institutions like the Japanese International Cooperation Agency (JICA).

But this would mean the state government has to raise Rs 4,000 crore of the Rs 12,132 crore metro project. "But we have no funds and are actively pursuing the option of a public private partnership," a state government official said. The state's gameplan is to award the contract to one of the four remaining pre-qualified bidders as this would bypass the need for a technical evaluation of the bidder as well as save the state from raising the funds needed for the project," said the official.

Five consortia participated in the metro rail financial bids of which the Maytas-led group including Nava Bharat Ventures bagged the contract in August 2008. Of the remaining four, Reliance Infra indicated on Tuesday that it would be in the fray if there are fresh bids for the project. Of the other three, G V K Group and Essar were undecided while Magna Allmore said it would be interested only if last year's bid is considered and fresh bids are not called for.

If both these options fail, the state would have no choice but to call for fresh global tenders. "We are in competition with Bangalore, where the work on the metro has already started. If we go for PPP model by picking one of thepre-qualified bidders, work on the project can begin by the first quarter ofnext year. If the other two options are forced on us, it would take at least acouple of years for the project to take off," said the state governmentofficial.

Meanwhile, Maytas Infra continued to be hopeful of being in contention. "We have not received any official communication. We still believe we have a chance," said the spokesperson. However, indications are that the termination notice would be served on the infratructure company on Wednesday morning.