Hyderabad: In the wake of the Satyam fraud fiasco, the Andhra Pradesh government is believed to be looking at alternatives for its ambitious metro rail project for Hyderabad, which had earlier been allotted to a Maytas Infra led consortium.

Reports said that state government officials have started contacting other bidders who had competed with Maytas for the project earlier, in order to estimate their level of interest in managing the project.

However, unlike last time where the government had been lured into allotting the project to Maytas on the promise of being paid a hefty fee, this time around the government could end up paying the firm to develop the metro rail.

Reports quoted unnamed industry sources as saying that no prospective infrastructure firm would pay the government to develop the metro rail project, and that the terms and conditions would now be determined by the firm that bags the deal.

The lender involved in the project would also have a greater say in the deal, reports said, while pointing out that the AP government could ill-afford to support Maytas with general elections round the corner and the prospect of the deal being scrutinised after possible revelations in the Satyam scam.

Reports in the media a few months ago had quoted Delhi metro chief E Sreedharan as terming the Hyderabad metro as a political scam.

The project has implications for common Hyderabad residents in terms of their commuting needs, and the Congress-led AP government would not be in a position to put the project on hold in an election year.

Last July, in order to secure the bid , Maytas Infra had not claimed any money from the AP government under `viability gap funding' and instead decided to pay the government to build the project, being rewarded in return through the allocation of 296 acres of prime land for commercial exploitation.
 
Maytas Infra's consortium partners included Navbharat Ventures Ltd, Ital Thai Development Public Company Ltd and IL&FS.

Maytas, which is Satyam spelt backwards, has on board Satyam group founder B Ramalinga Raju as a promoter. The Hyderabad Metro rail is planned as a three- corridor 71 kilometre project that has a projected cost of around Rs12,000 crore.

Other reports in the media said that the Hyderabad Metro Rail was virtually doomed, as Maytas, if it continues to be the firm responsible for building the project, could find it extremely difficult to raise the debt and equity component to fund the project.

Reports said that the firm would virtually be unable to raise any capital at all, let alone bide time till the financial closure on 18 March when it has to pay a performance guarantee of Rs180 crore and show its funds inflow and outflow to build the metro rail.

Financial closure would mandate the Maytas-led consortium to show its equity at around Rs4,000 crore and a debt component of Rs8,000 crore, in a 1:2 ratio, which is to be raised from financial institutions. Given that Maytas has at its helm Teja Raju, the son of Ramalinga Raju, industry sources say it would be virtually impossible for Maytas to raise debt and equity.

Maytas Metro Limited, the special purpose vehicle formed by the consortium, had signed the concessionaire agreement with the Ap government in September 2008, having paid Rs11 crore besides providing bank gaurantees worth Rs60 crore. In July 2007, it had bid for project y offering an inexplicable royalty of Rs30,311 crore spread across the contract period of 35 years, and had refused the Viability Gap Funding (VGF) of Rs4,800 crore offered by the government to cover 40 per cent of the project cost.

Reports said that with the deal virtually guaranteed to fall through at this point, it would most probably not be handed over to the next best bidder to avoid legal issues, and if fresh bids were invited, the public private partnership (PPP) mode may not be viable anymore since infrastructure firms would hesitate before getting involved in the project at the present time with the world economy undergoing a recession.

Reports speculate that the project is virtually doomed at least till the middle of 2010, since the AP government would have to rework the project from scratch, or the project would have to be funded by the central government under a sovereign guarantee, in which case it could take over a year to invite bids and choose a developer. With the general elections looming, no developments can be realistically foreseen till mid-2010, reports said.

On a related note, consulting and auditing firm Ernst & Young (E&Y) is also reported to being rethinking its association with Maytas, Raju's confession to perpetrating the Rs7,000 crore financial fraud at Satyam.