IL&FS mess hits Zojila tunnel plan, government scraps firm's contract

The problem at IL&FS has hit Asia's longest tunnel plan. The Centre has scrapped the contract for building the strategically important Zojila tunnel project in Jammu and Kashmir, which was bagged by IL&FS, and has also set up a high-level panel to suggest solutions for over two dozen stuck and stressed highway projects, many of which are related to the beleaguered group.

According to NHAI officials said the total number of stuck projects are around 25-30 and one-third of these are with IL&FS.

The work on Z-Morh tunnel in Jammu and Kashmir, which was also bagged by the troubled infrastructure major, has been stuck since last July. The state-owned National Highways and Infrastructure Development Corporation (NHIDCL), which is responsible for building highways in hill states and north-east, has served a termination notice to the IL&FS for no progress in this 6-km tunnel project.


According to sources, after terminating the contract for the Rs 6,800 crore Zojila tunnel (14.2 km) project, NHIDCL has asked its bank to encash the Rs 122 crore bank guarantee that IL&FS had submitted. “It’s up to the government to decide when we should go for fresh bidding. IL&FS had not started any major work after the foundation stone for this project was laid on May 19. We are ready to float tenders even by this month end,” said an official, who did not wish to be named.

He added the progress of work on Z-Morh tunnel is only 28% and as per the norm if the contract is terminated due to defaults on the part of IL&FS, the company won’t get any amount from NHIDCL. In such a situation, both IL&FS and the lenders will lose their entire investment. IL&FS has told NHIDCL that the entity was facing financial crises but it wants to complete the project. Completion of the two projects would ensure round the year connectivity to Leh and Ladakh region.