Karachi-Hyderabad motorway: NHA cancels contract with Malaysian firm

[Salman]

KARACHI, Jan 27: The National Highway Authority has cancelled a contract signed for the conversion of the existing four-lane Karachi-Hyderabad superhighway into six-lane motorway (M-9) and has invited new parties to build the road, it emerged here on Sunday.

According to sources, the NHA had given the contract on the basis of built, operate and transfer (BOT) to a Malaysian multinational company in January 2012 at a cost of Rs18.267 billion. Under a concession agreement, the company was to recover the cost by collecting toll from the vehicles using the road for 25 years, after which the road would have to be handed over to the NHA.

The sources said the NHA justified the cancellation by accusing the contractor of not fulfilling the conditions of the agreement while the contractor accused the authority of not meeting its part of the conditions without which the contractor could not start the work.

The sources said the NHA had failed to hand over the entire land / its papers relating to the construction as well as the right of way to the contractor who insisted that clear possession and title of the entire required land for the project in the name of the NHA was necessary, without which funds could not be arranged from the international and local financial institutions, though some of those had shown interest in the project.

In reply to Dawn queries, the NHA’s Yousuf Barakzai said the contract was terminated because the contractor could not do the financial close nor could start work according to the timeline set in the agreement and now the project had once again been advertised. Soon a new contractor, who could carry out the work, would be selected and awarded a contract in a transparent manner. He said the contractor could not even get the environmental impact assessment report approved by the Sindh Environmental Protection Agency which was mandatory before the start of work.

Asked if the title of the land and its possession was with the NHA, he said that almost 95 per cent of the land title and possession required for the project was with the authority. Soon the rest of the land title and possession would also be with the NHA. He said the contractor should have started the work and the rest of the land would have become available by the time road construction reached there.

He said it was a normal procedure here. Citing an example, he said the Lyari Expressway project had started many years back. The land for some of its portions was not available, but the work continued and a major portion of the expressway had been completed. Soon, as the rest of the land would be available, it would all be completed.
If the contractor had started the work on the 95pc available land, the leftover 5pc land would also have been made available, and the project would have been completed, added Mr Barakzai.

Answering Dawn queries, the contractor’s representative Sarfaraz Rizvi said the BOT concession had been awarded to Binapuri Holdings Berhad, and the agreement had been signed by its subsidiary Binapuri Pakistan. He said that a few points had been made “conditions precedent” in the agreement, which were transferring all land falling in the right of way in the name of the NHA, handing over of a clear and undisputed right of way to his company and obtaining of the EIA and social impact reports from the Sindh government.

He said the NHA had been bound to comply with those conditions within three months, based on which the concessionaire had to achieve the financial offer, leading to financial close of the project within six months. He said the NHA had failed to meet its deadline but insisted on Binapuri to comply with it in time.

He said that despite the NHA’s failure to fulfill the condition precedent of the agreement, his organisation had obtained a financial letter with terms sheet to finance the full amount of debt from the largest Malaysian bank, Mybank. But the NHA did not respond to the offer letter, and no negotiation on the terms sheet of Mybank could be started.

He said that in BOT projects of highways and motorways, the right of way was defined as “the real state” which was pledged with banking corporations to obtain a loan for the debt of money, usually 70 per cent of the project cost, while the remaining amount was injected by the concessionaire as its equity. He said that if the real state, that is the land of the project, was not in the name of the NHA, no financing agency would finance the project.

He said that over 700 acres privately-owned land in Thatta, Jamshoro and Karachi (Malir) districts, coming in the right of way route, had not been obtained by the NHA or transferred to its name to complete the full right of way for the motorway.

The NHA must realise its position and get 700 acres private land and 500 acres additionally for the interchanges transferred in its name before negotiating for the construction of the project, concluded Mr Rizvi.