MUMBAI: IRB Infrastructure Developers plans to claim a compensation of around Rs 60-70 crore from the National Highway Authority of India for terminating its contract for a Goa road project after the latter could not acquire land for it.
Road projects have faced delays due to issues relating to land acquisition, environmental clearances and right of way but this is only the second instance in the last two years where a project has been cancelled due to NHAI's inability to acquire land.
"We haven't yet received a compensation claim from IRB. But if this happens, it would be the first time where a developer seeks compensation for a project cancelled due to land acquisition problem. We will have to examine our liability in the case," a senior NHAI official told ET.
On December 23, IRB said that NHAI has cancelled the Goa road project that it had won in January 2010. Although IRB had written off the project from its order book in the quarter ended September in view of the inordinate delay in the project, the cancellation news had a negative impact on the shares of the company.
IRB shares have shed almost 10% on the Bombay Stock Exchange since the announcement as against a 1.4% decline in the benchmark index Sensex in the same period. Analysts said that the news of a compensation would only be a minor relief for the investors.
"The contract allows us to claim 150% of the equity investment of Rs 34 crore in the project. We may also claim compensation for the Rs 10-15 crore we spent on the financial closure and other work related to the project," IRB's Chief Financial Officer Anil Yadav said.
IRB had formed a special purpose vehicle, IRB Goa Tollway Pvt, to execute the project, which will claim the compensation for the project which entailed four-laning of the Panaji- Goa stretch of Goa -Karnataka Border road. At the time of winning the project, the company had said that it would cost Rs 800 crore, of which Rs 186.30 crore would be the grant from government.
Typically, at the time of awarding a project NHAI owns almost 80% of the land required for it while it acquires the balance within six months. According to NHAI, land acquisition has been most difficult in Goa, Kerala and West Bengal.
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