NHAI cancels 2 Essar contracts

NEW DELHI: Essar, which has been making headlines in the telecom sector, may be in for a rude shock. The National Highways Authority of India (NHAI) has terminated both its highway contracts of Rs 450 crore, part of the Golden Quadrilateral (GQ), on Wednesday. The company has failed to complete the project and has had huge cost and time overruns. It is likely that Essar may be blacklisted for NHAI projects.

The two projects were expected to be completed by August 2004. However, the present status indicates only about 70% project completion. Inspite of several warnings and meetings with the minister of shipping, road transport and highways, Essar has failed to pull up its socks.

���Essar was given enough opportunities to speed up the pace of work, but the performance has been unsatisfactory. First, the independent engineer of the projects issued them a notice. Now, we have also taken action,��� NHAI chairman Pradeep Kumar told ET.

However, Essar officials declined to comment. ���This is a matter between the contractor and employer. We would not like to comment,��� an Essar spokesperson said. The two ADB-funded contracts were for the 75-km Chitradurga-Harihar stretch and 56-km long Harihar-Haveri project, both on NH-4.

The status as on December 31, 2006 was 71% and 69% project completion for the two stretches, respectively. Both the terminated highway projects were being
developed by a joint venture of Essar with Malaysian contractor UEM.

The work had begun in March 2002. Industry sources said that Essar was facing a lot of problem due to inaction of NHAI in land acquisition. ���NHAI had still not given a complete position of land acquisition. Land was given to Essar in discontinuous stretches. Further, Essar had to create new structures, like overbridges, which were not part of the original design,��� a source said.

The move will delay the project. NHAI will now have to re-award the two contracts. This process could take up to a year, NHAI spokesperson said. The GQ project, or phase I of the National Highways Development Programme, is expected to be completed by December 2008. About 95% of GQ has been completed so far.