Is L&T black mailing govt over Metro Rail?

HYDERABAD: The infrastructure giant Larsen and Toubro's move in shooting off a letter to the Telangana government threatening to back off from the prestigious Hyderabad Metro Rail Project mid-way is being perceived as a 'blackmailing tactic' in its bid to secure more concessions from the government.

The State government officials are deeply hurt over the way the L&T Metro Rail has asked the government to take over the project and reimburse the expenditure incurred by it so far. L&T Metro Rail authorities' letter linking project viability to State bifurcation raises doubts over its business ethics

Some questions need answers

-What is the relation between Metro Rail project and State bifurcation?

-Telangana agitation was there since 2001 and it was at its peak during 2009. Why is L&T raking up the issue now?

-What is the basis for L&T to come to the conclusion that State bifurcation would result in reduction in traffic flow? Has it done any demographic survey?

-Why has the L&T quoted less at the beginning and is now saying it is not viable?

-In what way, development of real estate is related to viability of Metro Rail project? Does the L&T have any interest in real estate sector?

-Why is L&T not taking up construction at places where there are no right of way problems?

Though CM K Chandrasekhara Rao swung into action and put the lid on the controversy, the officials clearly see a larger game plan behind the L&T's letters to the State government.

For now, the controversy has subsided with a hurried clarification issued by L&T Metro Rail CEO and MD V B Gadgil, but several questions are being raised over the infrastructure company's conduct and business ethics.

Gadgil tried to brush aside the controversy saying such letters to the government were very routine, the tone and tenor of the letter and the way it was leaked to a section of media clearly exposes the company's flawed approach by mixing political issues with what is essentially a business agreement for execution of a project in the public interest.

The L&T management wrote a letter to the Hyderabad Metro Rail Managing Director N V S Reddy on September 10, expressing its inability to take the project forward and asked the government to complete the remaining works on its own.

Officials said that the L&TMRHL had given 'illogical reasons' in the letter threatening to back off from the project. The company said that resources in Hyderabad would decrease with Telangana being the small State and would be deprived of the benefits of sea ports.

The L&TMRHL raised the issue of real estate development not being the same in Telangana State compared to what it would have been in the combined Andhra Pradesh.

The company had also referred to the Srikrishna Committee report stating that they had believed Hyderabad would be the Union Territory in case of division of the State.

'The company until now said lakhs of people would travel in the Metro trains has changed its stand and now they are bringing in a new argument that running a metro based only on ticketing revenue is not possible,' said a senior official in the Municipal Administration and Urban Development department.

The official pointed out that nowhere it was written in the concessionaire agreement that AP was not going to be divided. After thorough studies, the metro was planned for 72 km across the three corridors and was only for the benefit of Hyderabad citizens.

There is no logic to assume that the city would not grow after formation of Telangana State. The recent survey had shown that the households in Hyderabad has grown from 80 lakhs to 1.20 crore, which only proves there is scope for the growth, the official argued.

The Telangana government has been proactive in promoting Hyderabad Metro Rail project as it wants the project to be expanded up to a stretch of 200 km.

The city is bound to grow with population reaching up to two to three crore with the Centre choosing Hyderabad for the prestigious ITIR (Information Technology Investment Region) project. The officials alleged that L&T's move was designed to seek cost escalation by citing certain excuses.

The L&TMRHL MD V B Gadgil, in a recently held press conference, said that the project was at a critical stage and that the cost of the project had shot up by Rs 3,000 crore.

The L&T consortium had won the bid for the Hyderabad Metro Rail project by quoting Rs 14,132 crore, which was lesser than the price quoted by other bidders.

'Now, it wants to make up for the lesser project cost by showing various excuses for cost escalation. If there are delays from the government side, it could definitely seek the escalation, but the L&T cannot threaten to dump the project mid-way and seek reimbursement. It clearly shows that the company wants much more than mere cost escalation,' an official said.

The civil society members wondered as to what the role of real estate is in a public transport project. Citizen for a Better Public Transportation convener C Ramchandraiah said, 'If you look at this project as a public transport venture, then there is no need for focusing on real estate.'

He said that their stand that the project was based purely on real estate business had been vindicated. The government had given 269 acres of land as per the concessionaire agreement but the L&T got an additional 70 acres of prime land in the city from the government, which is against the agreement.

Ramchandraiah said that the consortium cannot blame the government for delay in works. The government would, anyhow, pay the amount for the change in alignment but the company was trying to cover up for matters out of the purview of the government like the Dollar Rupee value, value of equipment, cement and steel prices.