‘Hyderabad Metro delay can hit other projects too'

The Rs 16,378-crore Hyderabad metro rail project, which is being executed by the country's largest construction company, L&T Ltd, has been beset by some ticklish implementation issues.

The project — considered one of the largest public-private partnership (PPP) projects ever awarded — has been facing problems related to ‘constructible right of way'— challenges in land acquisition, both along the three dense corridors spanning about 72 km and also for service and transit stations. This has effectively delayed its execution by over four months. The metro rail's implementation is being keenly watched by vendors and suppliers globally. This is a prestigious project for L&T, and its implementation means a lot for the company, the Andhra Pradesh Government and residents of Hyderabad, who are keenly tracking its implementation process, according to Mr Vivek B. Gadgil, Chief Executive and Managing Director, L&T Metro Rail.

In an exclusive interaction with

Business Line , Mr Gadgil, an L&T and construction veteran, said people often do not realise that a lot of work goes on behind the scenes, including design work. Work is progressing rapidly but some hurdles remain. But, like most projects of such magnitude, these are issues which will only be resolved gradually. Yet, some of the hurdles could have been sorted out earlier, Mr Gadgil says. Excerpts.

There is a general concern about delay of the project. How do you see the developments unfolding?

L&T was awarded the project in August 2010 and we signed the concession agreement on September 4, 2010. We were expected to close finances within six months thereafter. In spite of the economic downturn, we managed to achieve financial closure by March 3, 2011, with a 10-bank consortium led by SBI. We set up office in November and appointed Aecom, Halcrow, Parsons Brinckerhoff, L&T Ramboll and several other agencies to work with us. But there have been some issues such as land acquisition for service and right of way. We also faced the challenge of having constructible right of way, that is a path without hurdles of utilities.

So, what does it mean in terms of cost overruns?

Unfortunately, at least four months have been lost due to securing land for development. The Government assures us but there continues to be delays in securing land at terminal points. Officials have assured that within six weeks things would get better. Please understand, L&T is a developer, the land acquisition is a Government problem. Thus far, we have pumped in over Rs 800 crore. We have not drawn much from lenders. But the impact of this will have to be seen from a larger project implementation perspective. This (figure) could climb if the inflation is high, or we may benefit, if it comes down.

What is the impact of this delay on your other plans?

Effectively, this has delayed closure of selection of an operations and maintenance contractor and supplier of rolling stock. With most of the vendors being from outside India, they sign up only when things settle down. Therefore, any delay in land acquisition will impact the project as well as other contracts.

People are generally frustrated as they do not see much work on the ground. What is L&T's thinking?

More than 450 engineers are working behind the scenes along with consultants, and most of the design work is completed. More than 120 people are working at terminal locations. Work on the pre-cast manufacturing unit will be ready soon. So, there will be some developments once some irritants are sorted out. But delays in one area could have a cascading effect on others. However, in a project with about 5 years' construction time, we have the flexibility to make up some time.

What's your assurance to end users?

We are very positive about the project. There are no two thoughts about it. Yes, there are some serious concerns such as land and right of way. We hope they would be sorted out within six weeks, hopefully; enabling us to take up ground work.