IL&FS Transportation Networks' road project in Chhattisgarh caught in PIL mess  

March 10, 2010

IL&FS Transportation Networks Ltd (ITNL)’s public issue will open on Thursday. However, the company that claims to have a pan-India presence in build, operate and transfer (BOT) road projects is facing issues with its major road-development programme in Chhattisgarh. There is a public interest litigation (PIL) filed against the company that is pending with the Lok Ayukta.

“In the case of the Chhattisgarh project, there was an issue with the local member of the legislative assembly (MLA) Rajesh Bissa who filed a PIL in the High Court. The court asked him to go to the Lok Ayukta and the case is pending,” K Ramchand, managing director, ITNL, told Moneylife.

According to the right to information (RTI) awards website, Mr Bissa, who was also nominated for the award for using the RTI Act, 2005, revealed large-scale irregularities and corruption in selection of a private partner for the Rs2,500-crore road project along with the awarding of other large contracts by the Chhattisgarh government.

Mr Bissa’s investigation found that under the Chhattisgarh Accelerated Road Development Programme (CARDP), the government selected Infrastructure Leasing and Financial Services (IL&FS), a Mumbai-based company, for upgrading 1,500km of roads, but signed an agreement for 2,500km in an apparently crude attempt to allow an unfair advantage of Rs5,700 crore to the private partner.

The investigations also found that the state government had also broken many rules to favour IL&FS over its three competitors. The revelation forced the government to undo its mistake by describing the wording ‘2,500km’ in the agreement as a ‘typing error’. It also led to an enquiry by the Chhattisgarh Lok Ayukta, stalling the entire work on the project.

ITNL has a 74% beneficial interest in the accelerated road development programme in Chhattisgarh. ITNL’s promoter company IL&FS has transferred its interest in the project to ITNL through issuance of covered warrants.

The CARDP is a BOT annuity-based project for a period of 17.5 years. This project includes the development of two lanes with an aggregate length of about 1,368km connecting selected roads in the state. The road project in Chhattisgarh  will be undertaken in three phases.

The Jharkhand and Chhattisgarh accelerated road-development programmes are by far the largest under development and under construction road projects in the company’s kitty at present. IL&FS had signed a memorandum of understanding (MoU) with the Public Works Department (PWD) of Chhattisgarh in January 2007. The estimated cost of the project is around Rs1,400 crore.

The company’s public issue will hit the markets on Thursday. — Amritha Pillay