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UPA wants Hyderabad metro award to Maytas scrapped
January 15, 2009 02:52 IST
As a fallout of the financial irregularities in Satyam Computer Services [Get Quote], a section of the United Progressive Alliance government is in favour of cancelling the award of the Hyderabad Metro Rail project. The project was won by the Nava Bharat-led consortium, in which Maytas Infra, a listed firm related to Satyam's promoters, is one of the partners.
Maytas, which is run by the older son of disgraced Satyam founder Ramalinga Raju, is also under government scrutiny and the Registrar of Companies is investigating its role in the fraud in the Hyderabad-based software services firm to which Raju confessed January 7.
"There is a feeling that the government should come clean on its dealings with a company that is closely associated with Satyam promoters," said a minister.
The Nava Bharat consortium attracted considerable attention after it emerged the lowest bidder in July 2008 by quoting a "negative grant" of Rs 1,240 crore (that is, it would pay the government money for executing and running the project and did not require a subsidy) by raising funds from real estate along the metro route. Infrastructure Leasing and Financial Service Ltd (IL&FS) and Italian-Thai Development Public Company Ltd, Thailand's largest civil and infrastructure construction company, are the other two partners of the winning consortium.
The Nava Bharat consortium's bid had attracted controversy after E Sreedharan, head of the Delhi Metro Rail Corp Ltd, which was the project consultant for Hyderabad Metro Rail, opposed the concept of leveraging a land bank to finance the metro project. He warned that this model would erupt into a full-fledged political scandal. The Andhra Pradesh government subsequently dismissed him.
Planning Commission sources reveal that the project was originally estimated at around Rs 11,800 crore. "To show their intention, Maytas handed over a cheque of Rs 150 crore to the government on the day the project was awarded to them," said a government official.
Although there is no movement yet in the Planning Commission to make a fresh project report on the Hyderabad metro, top officials of the Commission believe a fresh estimate may peg the cost of the project at over Rs 15,000 crore.
"In the earlier estimate, not only the amount of land but also its price was not taken into account properly. Any new estimate will have to include the cost of the land required for the project," said a senior Planning Commission official.
S R Batliboi, the audit arm of Ernst & Young, has conducted an independent check on the bank balances of Maytas Properties and Maytas Infrastructure after the Satyam fiasco and has found that 100 per cent of the bank balances of Maytas Properties are in place. In the case of Maytas Infrastrcuture, 93 to 94 per cent of the deposits have been verified.
This number could go up further, said a source close to the developments, once the checks are complete. Unless the bankers stop giving money or the companies have no projects to execute, SR Batliboi officials said the firm will not disengage as the auditor of the two companies. Both companies retained Batliboi about a year ago.
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