IL&FS Crisis Hits Zojila Tunnel Project; Contract Cancelled For A Second Time
A worker walks through a new tunnel. (Photographer: Simon Dawson/Bloomberg)

IL&FS Crisis Hits Zojila Tunnel Project; Contract Cancelled For A Second Time


State-owned National Highways and Infrastructure Development Corporation Ltd. has terminated the contract awarded to troubled Infrastructure Leasing and Financial Services Ltd. for building the strategic Zojila tunnel to provide all-weather connectivity between Srinagar, Kargil and Leh.

IL&FS Transportation Networks Ltd. said the contract was terminated on Jan. 15. The NHIDCL is likely to invite fresh bids for the tunnel project in Jammu & Kashmir, according to officials.

"The contract awarded for construction, operation and maintenance of two-lane bi-directional Zojila tunnel awarded by NHIDCL in the state of Jammu & Kashmir has been terminated effective Jan. 15,” IL&FS Transportation said in a BSE filing.

The company is part of the crisis-hit IL&FS group which has defaulted on debt repayments due to financial mismanagement. The total debt of the group was pegged at Rs 94,215.6 crore as of Oct. 8. The government in October superseded the board of IL&FS and appointed new members to rescue the group.

This is the second time NHIDCL has cancelled the contract for the 14.15-km tunnel project which would cut down the 3.5-hour long drive through the mountainous Zojila Pass to 15 minutes.

Also read: Operational IL&FS SPVs Seek Refund Of Debt Payments, Says India Ratings

The corporation had earlier cancelled the bid of IRB Infrastructure. IL&FS Transportation in 2017 emerged as the lowest bidder in the rebidding process.

The development comes barely eight months after Prime Minister Narendra Modi inaugurated the work on the Rs 6,800-crore project, billed as the Asia's longest bi-directional tunnel, in Jammu & Kashmir.

The Zojila Pass is situated at an altitude of 11,578 feet on the Srinagar-Kargil-Leh National highway and remains closed during winters due to heavy snowfall, cutting off Ladakh region from Kashmir.

Unveiling a plaque for commencing the work for the tunnel, Modi had said, "Zojila tunnel is not a mere tunnel but a modern day marvel."

The Cabinet on Jan. 3, 2018, had approved the Zojila tunnel project with Parallel Escape (Egress) tunnel between Baltal and Minamarg on the Srinagar-Leh section of NH-1A at a total cost of Rs 6,800 crore.

The construction of the project was expected to be completed in seven years.

On Mar. 1, 2016, the Ministry of Road Transport and Highways had ordered "re-bidding" for the project, which had been awarded to IRB Infrastructure.

The decision was taken at a high-level meeting, chaired by Road Transport and Highways Minister Nitin Gadkari, after Congress leader Digvijay Singh had alleged that guidelines were violated while awarding the contract.

Also read: RBI Rejects Request For Special Classification Of IL&FS Loans

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