November 1 2003 - THE Indian Government is expected to respond next weekto the sidelining of India Railway Construction Co (Ircon) in theNorth-South double-tracking railway project’s northern grid from Ipoh toPadang Besar.

A meeting was held in New Delhi yesterday between the Indian RailwayMinistry, the Indian Prime Minister’s Department and officials of Ircon,according to an Indian Government source.

The meeting deliberated on press reports of announcements concerning theaward of the RM14.5 billion project to the MMC-Gamuda joint venture (JV).India’s High Commissioner to Malaysia, Veena Sikri, who is in India onleave, was to brief the meeting.

We can expect some reaction early next week ... New Delhi is likely tostate its stand clearly, the source told Business Times in Kuala Lumpur.

India and Malaysia signed a memorandum of understanding for thedouble-tracking and electrification of the Ipoh-Padang Besar stretch inMay 2001 in the presence of visiting Indian Prime Minister Atal BihariVajpayee and his Malaysian counterpart, Tun Dr Mahathir Mohamad.

Sikri recently conveyed her country’s concern over Ircon’s failure to beappointed the main contractor of the double-tracking project to Datuk SeriAbdullah Ahmad Badawi, who succeeded Dr Mahathir as Prime Ministeryesterday.

Meanwhile, Malaysian companies with projects in India are bracing for apossible fallout from the issue.

Some are linking the cancellation of Road Builder (M) Holdings Bhd’s RM261million road contract by the Maharashtra State Government in India lastweek to the rail project award. Road Builder told the Kuala Lumpur StockExchange that the cancellation was due to failure to agree on terms.

India is also one of the biggest buyers of Malaysian palm oil.

The source said the Indian Government may have felt indignation when Irconwas directed to deal with MMC-Gamuda, a small-sized private entity, whenit should be dealing directly with the Transport Ministry, which is theproject’s custodian under the government-to-government (G-G) initiative.

On Thursday, Gamuda informed the Kuala Lumpur Stock Exchange that thecompany and its joint venture partner Malaysia Mining Corp Bhd (MMC) willproceed to undertake the double-tracking project on their own as neitherIrcon nor China Railway Engineering Corp (CREC) has accepted their offerto be the project’s sub-contractors.

Yesterday, MMC in a separate announcement, said both Ircon and CREC whowere offered rights of first refusal, failed to indicate their acceptanceby 12 noon on October 30.

The MMC-Gamuda group has been awarded a RM14.5 billion contract to buildthe electrified dual-rail track in favour over Ircon and CREC who had beenissued letters of intent in the middle of last year.

The project, deemed to be part of the 5,500km trans-Asia link betweenSingapore and Kunming in southern China, was earlier proposed as acounter-trade arrangement between Malaysia and India and China to swap anestimated eight million tonnes of palm oil in exchange for rail works overa five-year period.

When contacted, a CREC spokesman said the company is not eager toparticipate in the national double-tracking project as a sub-contractor.

We are adamant that it should remain a G-G initiative ... therefore, wewill not accept the offer, the spokesman said without elaborating on whataction the company or the Chinese Government is likely to take.

Meanwhile, a Gamuda spokesman said all local partners of Ircon and CRECwill be receiving their offer letters soon. The partners are DRB-HICOMBhd, Emrail Sdn Bhd and Hikmat Asia Sdn Bhd.

He was responding to a claim by DRB-HICOM that the company has notreceived any offer from the MMC-Gamuda JV to undertake the double-trackingworks. There was an unfortunate clerical confusion ... we will call themup to explain next week, he said, noting that the MMC-Gamuda JV has othercandidates in mind should the three decline the offer.

The spokesman added that it is normal for companies to reply to an offerletter within four days or less. The short timing is not for us todictate. As to the claim of no proper designs or drawings attached, we don’t see a need to furnish those materials as the specifications in thestatement of needs have not changed since the project’s inception

The spokesman was commenting on allegations that Gamuda showed a lack ofgoodwill by demanding a swift response from the foreign parties.

It has been learnt that the MMC-Gamuda JV sent Ircon an offer letter datedOctober 26 to be the project’s subcontractor a time when most of Ircon’stop management was on Deepavali leave. The Indian party was given 14 daysto reply.

However, the time-frame was shortened to four days when Gamuda announcedto the KLSE that Ircon and CREC rejected the offer to be the project’ssub-contractors.

Ircon is believed to have made several enquiries to the Transport Ministryon the status of the G-G initiative since the moment it received the offerletter from the MMC-Gamuda JV, but to no avail.

MMC-Gamuda has offered Ircon RM3.36 billion to undertake 70 per cent ofthe civil works for the Padang Besar-Ipoh stretch (northern grid) and CRECRM2.3 billion for 70 per cent of the Seremban-Johor Baru link (southerngrid), sources said.