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NHSRCL new tendering norms weaken competition in Bullet Train project

The National High-Speed Rail Corporation Limited (NHSRCL) has been leasing out work for constructing fast-track railway projects. These are specialized work and supposedly huge in value.

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New Delhi: The introduction of fresh clauses in the tendering process for the C2 package of the Mumbai-Ahmedabad high-speed train project does not seem to be going down well with the major infra players who are placing bids for the prestigious project, sources indicated on Friday here. The new norms may weaken the completion in bidding and cause worry to the interested infra companies.

Various industry insiders who we spoke with termed the new clauses “arbitrary” and something which will lead to a significant rise in the overall cost of the project over a longer period. They also pointed out the deliverability aspects of the project since many large companies find themselves in a fix following the new clauses.

The National High-Speed Rail Corporation Limited (NHSRCL) has been leasing out work for constructing fast-track railway projects. These are specialized work and supposedly huge in value.

According to an industry insider, the NHSRCL has laid out some fresh clauses for the bidders to follow for the C2 package. These clauses were not there while bidding for the C1 package. One of the clauses says that the bidders “should have neither obtained any debt restructuring nor should have applied for any debt in the last three years to the date of bid submission”.

This has now become one of the major issues that are concerning the industry as most of these high-value infra projects and companies do substantially operate on loans and debts and hence this new clause is making a host of contractors uneasy, we have learned from several industry sources. A legal expert who specializes in infrastructure puts a poser: “Since when has taken a loan to become illegal for running a business? This clause in itself is counterintuitive. On one hand, it presumes that restructured entities should not be able to get a loan, on the other, it prohibits a firm that has applied for a loan to participate in a tender. This is prohibitive and excessive. It also goes against the spirit of improving the ease of doing business that the current government is championing”. A well-known finance arranger quipped, “Applying for a loan is not same as a sanction of loan which is not same as disbursement of loan which is not same as failure to repay a loan which is not same as a defaulter of loan. Clearly, something is amiss here”.

The point to note is that this clause was not there during the tendering process of the C1 package. Which essentially allowed the party that had obtained any debt restructuring in the previous three years to bid for the same. In such cases, the bidding party is required to open a dedicated “Trust & Retention account” (T&R account) and submit the list of vendors, suppliers, sub-contractors, and other consultants who the bank will make direct payments on the cue of the Contractor, preventing the contractor to divert the funds for some other work. This has been taken off in the new norms released.

 

As of now, the C1 Package Tender Process is completed and a Joint Venture bidder has already been declared the lowest bidder for quoting a competitive price. The difference between the lowest and the second lowest bid is around 600 Crores, as per reports. Now, with the new clauses which make “Trust and Retention” accounts non applicable, even the existing contractors who have won separate packages of the project find themselves in a position where they do not qualify for the tendering process.

Thus, the bidders who have already obtained or are in the process of getting debt restructuring shall not be eligible to participate in the bid, bringing down the competition in the whole process.

As per experts, this amendment outrightly eliminates many technically sound companies from participating in the bid, especially when very few qualified companies exist in the Indian market to compete for these high-value tenders. With elimination of healthy competition in result it will also incur loss to NHSRCL and might likely become a burden for the government in execution of the project.

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