Sewri-Nhava Sheva Trans-Harbour Link: The story of unrealistic bidding and spiralling cost
Moneylife Digital Team 22 July 2013

In less than 10 years, the cost of Sewri-Nhava Sheva Trans Harbour Link has gone to about Rs10,000 crore from Rs4,000 crore. After some unrealistic bidding in the initial stages, at present not a single bidder is willing to submit a bid for the project that would reduce commuting time between Mumbai and Navi Mumbai

It has been 43 years since the Mumbai Trans-Harbour Link (MTHL) project was first proposed. The MTHL project also known as Sewri-Nhava Sheva Trans Harbour Link, a 22 km freeway grade road bridge was expected to reduce commuting time between Mumbai and Navi Mumbai and provide direct connectivity to Mumbai Port Trust (MPT), Jawaharlal Nehru Port Trust (JNPT) and the proposed Navi Mumbai international airport. Unfortunately, unrealistic bidding by consortiums, especially from both Mukesh and Anil Ambani led consortiums and objections raised by environmental activists as well as JNPT, have only doubled the cost over the years.

 

The first real attempt to make this project a reality was made in 2004, when IL&FS submitted a proposal to implement the project on a build, own, operate and transfer (BOOT) basis. State-run Maharashtra State Road Development Corporation (MSRDC) also submitted a counter proposal. Although the proposal by IL&FS was discussed by the government, it was side-lined for reasons best known to the authorities.
 

Then in 2005, MSRDC invited bids for the project. However, the process to receive bids and award the project went on till 2009. A consortium of Anil Dhirubhai Ambani Group

 

How the cost shot up
The cost of the MTHL has increased several times. In 2005, the cost of the project was estimated at Rs4,000 crore. The cost was revised to Rs6,000 crore in 2008. It was then increased to Rs8,800 crore in November 2011 and finally to Rs9,360 crore in August 2012.

In January 2013, the union government sanctioned Rs1,920 crore,  which is 20% of the project cost, in viability gap for the MTHL project. The State Government will also contribute the same amount while the winner is expected to pull in the rest. This also means, the cost of the project has not gone up to Rs9,600 crore, a whopping 240% from the estimated cost of Rs4,000 in just 10 years.

 

company Reliance Energy (REL) and Hyundai Engineering Construction Company quoted a concession period of nine years and 11 months against 75 years quoted by Mukesh Ambani's Sea King Infrastructure, the only other bidder left in the fray. Significantly, in 2004, the MSRDC taking into consideration the 30-year concession period for the Mumbai-Pune Expressway, had estimated a 35-year concession period for the Sewri-Nhava Sheva Trans Harbour Link project. At that time the cost of the project was estimated at Rs4,000 crore.

 

Interestingly, the REL-Hyundai consortium was disqualified at the technical bid stage as Hyundai did not meet the criteria of $200 million networth as per the bid documents. Even L&T Gammon Industries and IFFCO, the other bidders opted out of the race leaving Sea King as the only bidder, says a report from Business Standard.

 

However, according to the report, the REL-Hyundai consortium challenged the disqualification in court and got a favourable verdict from the Supreme Court. The apex court granted the consortium 90 days to submit its bid that ended on 15 December 2007, the report said.

 

Although the REL-Hyundai consortium won the bid, MSRDC itself was not sure about viability of such a low concession period. MSRDC then re-evaluated the winning bid through London-based Dar Consultants. Business Standard, in a report quoted, the then minister for public works and MSRDC chairman Anil Deshmukh as saying, “The concession periods demanded by both brothers seem to be unrealistic.”

 

Deshmukh also told Mumbai Mirror that both bids seemed frivolous in nature, and that a final decision would be taken based on the report submitted by the consultants to MSRDC.

 

Concessional period for a project is the time taken to complete the project, collect the toll to cover the cost, and then hand over the project to the government.

 

The state government then decided to invite fresh bids for the project in 2008. Although, the fresh round of bidding saw as many as 13 companies evince interest in the project, none submitted bids. At that time the cost of the project was revised to Rs6,000 crore.

 

Then in 2011, the Mumbai Metropolitan Region Development Authority (MMRDA) stepped into the scenario. In August, MMRDA appointed Arup Consultancy Engineers and KPMG to conduct the techno-economic feasibility of the Sewri-Nhava Sheva Trans Harbour Link. Again, the cost of the project was increased to Rs8,800 crore from original estimate of Rs4,000 crore.

 

In May 2012, the MMRDA shortlisted five consortia out of six that had expressed interest in the project. They are Cintra-SOMA-Srei, Gammon Infrastructure Projects -OHL, Concessions-GS Engineering, GMR Infrastructure-L&T -Samsung C&T Corp, IRB Infrastructure Developers-Hyundai, and Tata Realty and Infrastructure-Autostrade Indian Infrastructure Development Pvt Ltd-Vinci Concessions Development V Pte Ltd.

 

In the meantime, the cost of Sewri-Nhava Sheva Trans Harbour Link was again revised to Rs9,360 crore in August 2012.

 

On 22 October 2012, Maharashtra chief minister Prithviraj Chavan gave clearance to the project. Next day, the ministry of environment and forests (MoEF) gave a conditional environmental clearance to the sea link project. Some of the conditions were that the MMRDA should put up noise barriers, replant five times the number of mangroves destroyed, no dredging and reclamation, use construction equipment with exhaust silencers and work in consultation with the Bombay Natural History Society to minimize the impact on migratory birds.

 

October 2012 turned out to be an eventful month for the Sewri-Nhava Sheva Trans Harbour Link. Following the clearances from the state government and MoEF, on 31st October, the Department of Economic Affairs (DEA) also granted an in-principle approval for the MTHL. The DEA recommended granting Rs1,920 crore with a concession period of 35 years for the project.

 

On 9 November 2012, the state government issued a state-support agreement and a toll notification for the project. The empowered committee approved viability gap funding (VGF) for MTHL on 12 December 2012. Later on 18 January 2013, union finance minister P Chidambaram cleared the project. 

 

Although the MMRDA shortlisted five consortiums for the project, so far is has not received any bids. According a report in the Times of India, the state government has finally decided to construct the Mumbai Trans-Harbour Link on its own if it does not receive a bid on 5 August 2013.

 

Quoting UPS Madan, metropolitan commissioner, MMRDA, the report said, “...this time the government will not let the project fall for want of funds. If we do not receive any bids on August 5 then we shall go on our own”.

 

In January 2013, the union government sanctioned Rs1,920 crore,  which is 20% of the project cost, in viability gap for the MTHL project. The state government will also contribute the same amount while the winner is expected to pull in the rest.

 

This also means, the cost of the project has not gone up to Rs9,600 crore, a whopping 240% from the estimated cost of Rs4,000 in just 10 years. Unfortunately, it is the common people who will have to foot the bill either directly (through toll) or indirectly (through various taxes).

 

Comments
raghav uchil
1 decade ago
It is same story all over again. Be it dams or trans harbour bridges or SEZ projects, cost escalation is the way forward to siphone off tax payers money. They have become hard skinned inspite of possible CBI enquiry later on.
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