GAIL is considering scrapping Rs 270-cr contract with debt-ridden IL&FS

The termination of the deals could prove to be a setback for the project aimed at taking natural gas to much of eastern India

New Delhi: Gas Authority of India Ltd (GAIL) is considering ending the Rs 270-crore pipe-laying contracts it awarded to IL&FS last year as the credit crunch facing the contractor continues to simmer, a source told The Economic Times. The termination of the deals could prove to be a setback for the project aimed at taking natural gas to much of eastern India. The gas utility was last year planning to commission the 2,655-km pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal, with branch lines to Bokaro in Jharkhand and Dhamra in Odisha. The completion of the project, a part of 'Pradhan Mantri Urja Ganga' pipeline project, was expected to help revive three fertiliser units in UP, Jharkhand and Bihar.

A unit of IL&FS, IL&FS Engineering and construction company, had won two contracts to construct pipelines last year — 100 km Bokaro-Angul stretch of the Urja Ganga project and the 160 km Dobhi-Durgapur stretch.

"Due to its financial crisis, IL&FS is unable to pay its subcontractors and suppliers. So, these sub-contractors have stopped working and vendors have stopped supplies. This can delay the entire project," the source said. Some IL&FS executives linked to the two contracts have also quit, sources said. IL&FS declined to comment. A unit of IL&FS, IL&FS Engineering and construction company, had won two contracts to construct pipelines last year — 100 km Bokaro-Angul stretch of the Urja Ganga project and the 160 km Dobhi-Durgapur stretch.

In addition, the National Highways & Infrastructure Development Corporation Ltd (NHIDCL) earlier this month ended their contract with IL&FS group for the construction of the strategic Zojila tunnel, IL&FS Transportation said in a filing. The project would have provided all-weather connectivity between Srinagar, Kargil and Leh.

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