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February 6, 1998



Email this story to a friend. Tamil Nadu's grandiose Rs 15 billion plan for a Cyber City is beginning to crumble even before the first brick has been laid.

The project involves the development of 200,000 square feet of office space for software companies along with residential and recreational facilities in Kelambakkam, 15 km from Madras.

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A mini-golf course, swimming pool, tennis courts and a multi-cuisine restaurant are part of the initial project specification.

But early signals from the two contenders shortlisted for building the project indicate that the Tamil Nadu government may be forced to go in for a massive downsizing or even scrapping of its dream city.

The government may shelve the project if it is not satisfied with the bids made by both parties.

A final decision on the largest-ever software project in the country will be made in early March.

The Reliance-Larsen & Toubro consortium, one of the bidders for the project, has clearly stated in a presentation to the state government that the five-year timeframe is too short for such a massive undertaking.

"The development of 200 acres in five years involves marketing of about 1.7 million square feet per annum. This is not feasible in the initial years. The development phasing can be in accordance with marketability only,'' Reliance is learnt to have categorically told the state government.

Reliance had indicated that it would initially invest only Rs 800 million and the "rest of the project will be self-financed from internal accruals".

The Daya Group of Malaysia, the other contender, may also not be in a position to undertake such a large project in the wake of the currency crisis in Southeast Asia. Articles in the Malaysian press indicate that the corporation is at present standing on rather shaky ground.

Marketing problems faced by developers of similar projects in Bangalore and Hyderabad also seem to weigh heavily on the minds of the bidders. For instance, Andhra Pradesh is finding it difficult to sell space in its partially complete Hi-Tec City.

Worried about the demand-supply equation for software parks, the Reliance-led consortium had asked the state government to give an undertaking that it would not develop a similar infotech facility in the state for a specified time. The government is unlikely to oblige.

The consortium had also called for a detailed project report by an independent international consultant of repute to establish the technical feasibility of the project.

The DPR would have to be a credit-rated bankable document that could withstand the due-diligence scrutiny of investors and lenders.

Reliance is now learnt to have stated that it will commence work on the project only after the DPR is filed. The completion of the DPR could take well over six months and result in further delays. The government may not agree to such terms.

The amount of performance security to be paid by the bidders to the government has become another bone of contention. The government has asked for 5 per cent of the project cost subject to a minimum of Rs 150 million as performance security. The bidders are lobbying for halving the amount.

Both parties have been asked to put in their technical and commercial bids before the end of February. Reliance made its pre-bid presentation to a high-power committee of government secretaries last month. The Daya Group is scheduled to make its presentation next week.

The Electronics Corporation of Tamil Nadu and the Tamil Nadu Industries Development Corporation had floated a tender for the project early last year. Reliance and Daya were shortlisted after a revised tender was floated.


- Compiled from the Indian media

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