Metro lines to IT hubs on a shaky track

Construction firm ITD Cementation India, which is building four projects involving 24 stations under Namma Metro Phase II that proposes connectivity to the IT hubs of Whitefield and Electronic City, has said the 24-km project could leave it with a potential loss of about Rs 40 crore. The claim, however, does not appear to bother the Bangalore Metro Rail Corporation (BMRCL) as it believes such calculations are premature given that “only 30% of the physical work is complete”.
There is, however, a fear that the disagreement between the contractor and the BMRCL could jeopardise the completion of the four projects. Already behind schedule by six months, the progress has been hit hard by land acquisition hurdles and lack of manpower. Field visits also show that the construction of some stations, including the ones at Tin Factory, Mahadevapura and Vydehi, has ground to a halt.

During a recent conference call with investors, Jayanta Basu, managing director of ITD Cementation India, said that the four metro projects are causing the company a loss of Rs 40 crore. “In Bangalore metro, the job value has substantially come down by about 20%. Our original value was around Rs 2,400 crore, which is now around Rs 2,000 crore,” he said.

Explaining what he meant as loss of at least Rs 40 crore, Basu said the bids (related to the construction of metro projects) had overstated the quantity of work. “We have bid for say 1,000 cubic metres of concrete, but 1,000 cubic metres has come down to 800 cubic metres now, so we are getting payment only for 800 cubic metres,” he said while acknowledging that there has been no change in the number of stations and kilometres to be built.

The contractor has said it would go for arbitration if direct negotiation with the BMRCL fails. BMRCL MD Ajay Seth said he was unaware of the issue and the company has not discussed the subject with them.

The claim of ITD Cementation India, however, does not seem as serious as it sounds. A BMRCL official, on the condition of anonymity, said it is too early for the contractor to assume that the quantity of work has dropped by 20%. “In any construction project, the payment is always measured based on the quantity of work done, which is the standard practice. The quantity of work always varies by 10-20% and every contractor knows it. While bidding, the contractor fixes a price on each item, be it steel or concrete, keeping in mind the margin of profit in each item. Therefore, the contractor is sure to make a profit even if the quantity of work comes down,” he explained.

The official also mentioned that ITD Cementation is unlikely to incur any loss. “In this particular case, if the volume of work happens to come down, the company’s profits may come down a bit,” he said.

ITD Cementation India had bagged four projects of Namma Metro (Phase II) at a total cost of around Rs 2,400 crore. Consisting of 24 metro stations, these projects, part of 72-km Phase II, are coming up on the Baiyappanahalli-Whitefield stretch and Hosa Road (Electronic City)- Bommasandra stretch.

Basu also said there have been delays in working front availability, which resulted in a delay. “We are supposed to complete the job by the end of this year but now we expect it to go up to the next year in June or July,” he said.