The Maharashtra government has decided not to pay more than Rs 120 crore as cost escalation charge to the Hindustan Construction Company for the sea link project between Mahim and Nariman point.
The decision was taken last week by a high power committee headed by state chief secretary Ajit Nimbalkar.
A source close to the development said: "HCC has been demanding around Rs 265 crore more (Rs 2.65 billion) for the project, citing cost escalation as well as the addition of a 1.5 km strip between Bandra and Worli to the original project. The state government, after conducting two appraisals, has put the extra cost at Rs 120 crore (Rs 1.20 billion)."
The Maharashtra State Road Development Corporation and the Public Works Department of the state government, based on the bills submitted to MSRDC by HCC for the completed segments of the project, have concluded that the rational cost escalation should not exceed Rs 120 crore.
"The HCC will now be told to accept this figure as the escalation amount or else the state government will have to scrap the company's bid and invite fresh tenders for the remaining portion of the project," the source said.
HCC chief Ajit Gulabchand as well as managing director M D Khatar were not available for comments.
The state government had appointed a high power committee under chief secretary Ajit Nimbalkar to resolve the issue of the cost escalation sought by HCC. The project work has been shut down since October 2003.
The government is believed to have kept the option open for HCC to go in for arbitration, if it desires to do so. The other option available for HCC, if it disagrees with the cost escalation charge, is to approach the Mumbai High Court.
