Wednesday, September 17, 2014

L&T's letter to Govt for Project Takeover

This can’t be a routine letter. The 8-page letter is provided below with each page an image. I managed to get from a friend in the media.
Subject: Hyderabad Metro Rail: Project Takeover Proposal
The letter by L&T Metro’s MD, Mr. Gadgil, to the MD of HMR is dated 10th September 2014. It runs into 8 pages. In the letter, Gadgil cites 7 letters of correspondence between L&T, HMR and Chief Minister of erstwhile AP between 6 February to 15 July 2014. He raises two main issues in the letter. 1. Delay in providing Right of Way (ROW) for faster execution of works as per the Concession Agreement. Providing ROW is the obligation of the Govt of AP/T. 2. He raises the changed circumstances in the status of Hyderabad due to division of AP and its adverse impact on the financial viability of the metro.
In point 16, it is argued that “Prior to bifurcation of Andhra Pradesh, Hyderabad was the capital city of a state which was well developed, espousing various eminent districts and port towns. However, now it is the capital city of a smaller state with lesser resources than the undivided Andhra Pradesh……Further, there is reduction in the strength of representation of the State in the Parliament. Thus, the position of Hyderabad in drawing investments, both the Central Government and private sector has altered. Consequently, the potential returns from its real estate will get reduced…The change in the status of Hyderabad has resulted in a significant change in the economic and political outlook of Hyderabad, thereby causing material adverse impact on the financial viability of the Project”.
L&T did not think that AP will be divided. In point 22, he mentions that various agitations have been made, without any success, for creation of Telangana. So, we could not anticipate the bifurcation of AP till the AP Reorganisation Bill was introduced.
L&T seems to have hoped that the GHMC will be made a UT. In point 23(iii) he mentions that the creation of Greater Hyderabad in 2007 was viewed “as a precursor to converting the city into a Union Territory, if the state was split”.
In point 24, he states …”it would be most appropriate that the GoT should take over the Project and the underlying contract from the Concessionaire. The GoT should do so by restituting the Concessionaire in a manner whereby the Concessionaire’s property and entitlements are returned to it”.
If the L&T continues with this project it has to explain how it will become financially viable hereafter.

L&T wants the Metro to be taken by the Govt of Telangana

L&T giving up on Hyderabad Metro? It will be sensation. This came too sooner than expected. L&T is known to have written to the Hyderabad Metro Rail Ltd (which represents govt of Telangana) that they can't proceed with this project, and asked the govt to take over it. Today's top headline in Andhra Jyothy paper. L&T seems to have repeatedly mentioned about non-provision of Right of Way due to which there is significant cost escalation, and bifurcation of the state. It feels that there is reduced prospects for financial viability of the metro in Hyderabad. It looks like that L&T believed that the state will not be divided, or Hyderabad will be an UT or a joint capital in a proper sense. My comment is quoted in the second picture given below.