When Tamil Nadu chief minister J Jayalalithaa inaugurated the first 10-km leg of the Chennai Metro on June 29, the excitement in the city was palpable. Chennai, at last, was on the Metro map after delays of over a year. Trouble, though, had begun brewing in early May.A Russian contractor, Mosmetrostroy, carrying out tunneling operations over an 18-km length underground, had disappeared without a word to Chennai Metro Rail Limited (CMRL). Over 90% of the work was completed on the Saidapet-Gemini stretch while 70% of work was done in the LIC-Thousand Lights phase when the Russians abandoned work.Mosmetrostroy, a Russian pioneer in building underground metro tunnels and stations, was partner to Gammon India in a joint venture that was awarded two packages for construction of the underground portion of the Chennai Metro Rail.Two other joint ventures were working on the construction of an underground tunnel and a station in other parts of the city — Afcons Infrastructure with Russian firm Transtonnelstroy, and Larsen & Toubro with Chinese firm Shanghai Urban Construction Group.In July 2015, CMRL terminated the Rs 1,947-crore contract with Gammon-Mosmetrostroy. Gammon India subsequently moved the Madras High Court praying for a stay on termination and to stop CMRL from invoking bank guarantees supplied by it.On July 27, the court asked both Gammon India and CMRL to come up with names for an arbitrator to resolve the issue. It also asked both parties not to “precipitate the issue”.A prolonged court battle is in the offing while termination of the contract will mean an additional two years’ delay in the work. ET Magazine spoke with senior officials in all three firms and cross-verified claims made by each. All of them spoke only on the condition of anonymity.The ground beneath the Thousand Lights area in central Chennai is the key to the troubles of the Chennai Metro Rail. “The Detailed Project Report [DPR] was not done properly and soil analysis was wrong,” alleges a senior official close to Mosmetrostroy, which was involved in the tunneling work.“After the contract was signed between CMRL and Gammon-Mosmetrostroy, CMRL revised the alignment. The final alignment was three metres deeper than originally decided and this changed everything,” he says.Soil in this area consists of various layers — on top is clay or loose soil, followed by soft rock, then rock and finally hard rock. “Mosmetrostroy had settled upon a particular set of equipment and cutter heads based on the original specifications,” continues the official.“But now with the change in alignment, it would mean a change in cutter heads which would cost more. This is because with the new alignment, there was a larger percentage of hard rock — and this is very tough to break through,” he explains.Over a hundred cutter heads are fitted onto the head of the tunnel boring machine that works underground to create the space for trains and stations to pass through. These cutter heads are of different sizes and strengths and are purchased and assembled depending on the nature of soil.“Mosmetrostroy purchased the requisite equipment and went ahead and completed the work,” says the official. “But the Russians faced huge problems. Cutter heads were damaged within 15 days in some difficult stretches when they came up against very hard rock. Cutter heads usually have a life of around five to six months, so you can imagine the kind of challenges they were up against,” he says.



Between mid-2013 and mid-2014, as per schedule, the tunnel boring machine should have been stopped only twice. But due to these issues, the machine was stopped seven times, each resulting in a delay of between 15 and 20 days. “For all of this work in the Saidapet package alone, Mosmetrostroy has run up additional bills to the tune of Rs 40 crore,” says the official.

“Mosmetrostroy had written to CMRL before all this took place, stating that there will be a cost escalation. CMRL did not respond in writing but verbally assured the Russians that payments would be made since there is anyway a cost leeway in the contract for extraneous costs. That verbal assurance was not honoured,” he says.

With bills mounting and local subcontractors getting aggressive in their demands for payment, the Russians had had enough. They abandoned work and headed back home, leaving a short explanation with their partner Gammon India that they were stepping out of the project since CMRL was unwilling to pay up despite the work done.“We never gave any verbal assurance to Mosmetrostroy,” says a senior official at CMRL. “They made some claims and we rejected them. It is as simple as that. Mosmetrostroy left because their finances were in bad shape and they were unable to pay their vendors who started harassing them. We have invoked some bank guarantees since the work has not been completed from their side,” he said.CMRL also denies any revision of alignment. They say there was no variation and that it was part of regular work under the contract. “This is their problem,” says the official. The Russian firm has incurred costs of Rs 40 crore on one package alone.Costs incurred in the package involving the work done in the Government Estate leg are yet to be calculated. Mosmetrostroy has an additional Rs 25 crore worth of cost escalations as a claim with CMRL, which has been rejected by CMRL. And now with CMRL encashing Rs 75-crore worth of bank guarantees, the company is staring at a loss of Rs 140 crore on the Chennai Metro Rail project.In 2011, when projects were awarded to the various joint ventures, Gammon India was a profitable company. In 2011, as per the Bombay Stock Exchange site, yearly net profit of Rs 118.45 crore was reported. By 2012, net profit had come down to Rs 87.04 crore. In 2013, the company took a hit, posting losses of Rs 445.67 crore. Losses mounted to Rs 765.91 crore in December 2013. By September 2014, however, the company began to limp back into the black, posting net profit of Rs 67.8 crore. In June this year, Gammon India decided to go in for corporate debt restructuring to the tune of Rs 14,800 crore.“When we first awarded the contracts, Gammon India was doing well financially,” says the CMRL official. “Since 2012 we have issued notices to Gammon-Mosmetrostroy three times due to tardy rate of work. In October 2014 we found that there was 50% slipping on their own New Progress Plan. We have even given special advance of Rs 80 crore on an interest basis outside the contract,” he says. CMRL alleges that progress was so slow that the work would have been completed only by December 2019. This, they say, is what forced them to terminate the contract.Gammon India officials are furious at this claim. “No doubt there were delays because of the soil issues but we are on a par with the other JVs,” says a senior official from Gammon who did not wish to be named. “The other two JVs have completed between 65-75% of the work in 53 months, while we have completed 63-72% of work within 51 months,” he says. “Who has stuck to the timeframe? Everyone has asked for extensions. Why penalise only us?” he asks.CMRL also cites the precarious financial position of both Gammon India and the Russian firm to back up its move. “They faced a bad cash crunch,” said the CMRL official. “It is quite common in the construction industry.” Gammon though says whatever the crunch, their bankers who are doing the debt restructuring, ICICI Bank, have given a letter of support to CMRL stating that the bank would support the Chennai Metro Rail project specifically.“The balance half a billion has been committed for the Chennai Metro project. We have also got a letter from our vendors stating that they would support us until the project is complete,” he says.The company claims that their officials visited CMRL several times and offered to step in with a new partner, Italian firm Seli, an expert agency in tunneling. “But CMRL kept refusing, we don’t know why,” he says. Gammon also alleges that while they billed Rs 700 crore, they actually pumped in Rs 900 crore.When trouble began with payments, Gammon and Mosmetrostroy wrote to CMRL asking them to appoint an adjudicator to the Dispute Adjudication Board. As per the terms of the contract, both parties could go in for arbitration only if adjudication failed. Gammon officials say that CMRL appointed their own employee as an adjudicator under pressure.“How is that acceptable? Their own employee cannot be expected to be neutral, right? We protested in writing and there the matter was left hanging,” says the Gammon official.CMRL confirms that they did in fact appoint their own employee when efforts to find an arbitrator failed. They say the appointed adjudicator was not connected to the Metro project in any way. They also said that Gammon-Mosmetrostroy could have suggested names for the post.The Madras High Court has asked both CMRL and Gammon India to suggest two names for arbitration. Gammon is battling for a stay on termination, hoping to take over where they left off and complete the job. CMRL is readying for fresh tenders for the remainder of the work. As each side hardens its stance, the people of Chennai will continue to suffer congested roads for two more years. And you and I will pay a lot more, perhaps avoidable unnecessary costs, towards getting the Chennai Metro up and running.(The writer is a freelance journalist based in Chennai)