IL&FS building in Mumbai | Abhijit Bhatlekar/Bloomberg News
IL&FS building in Mumbai | Abhijit Bhatlekar/Bloomberg News
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PM Modi had laid the foundation stone for the Zojila tunnel on the Srinagar-Leh Highway in June 2018, but the project has been stalled since November.

New Delhi: The Infrastructure Leasing & Financial Services (IL&FS) has terminated the contract to build the Zojila tunnel in Jammu and Kashmir, proposed to be India’s longest tunnel, due to the financial crisis it is trapped in.

IL&FS, which was given the contract to build the tunnel by the National Highways and Infrastructure Development Corporation Limited (NHIDCL), wrote to the latter Thursday, stating that the contract to construct, operate and maintain the tunnel had been terminated effective 15 January. The letter was issued by Krishna Garg, IL&FS vice-president and company secretary.

Work on the Rs 6,809-crore Zojila tunnel project had come to a standstill due to IL&FS’ financial crunch in November 2018, five months after Prime Minister Narendra Modi laid its foundation stone. IL&FS is reeling under a debt burden of over Rs 90,000 crore.

N.N. Sinha, managing director of the NHIDCL, which is overseeing the project, said: “We did not have doubts about their (IL&FS) technical efficiency, but they had financial troubles, which is why work was moving at a slow pace.”

Also read: India seeks to reopen IL&FS books citing auditor mismanagement

Importance of the tunnel

The Zojila tunnel project was green-lighted by the previous UPA government in October 2012. The tunnel, on the Srinagar-Leh highway, was proposed to be a 14.150-km-long, two-lane tunnel. Along with the Z-Morh tunnel, the Zojila project was supposed to ensure that the highway, which is shut for seven months in a year due to snow, can provide all-weather connectivity.

The NHIDCL had signed an MoU with ITNL, a subsidiary of IL&FS, and the Ministry of Road Transport & Highways, in January 2018. PM Modi laid the foundation stone in June 2018, and said he would ask the ministry to look at ways to reduce the proposed seven-year time period for the completion of the project.

The IL&FS crisis

The three-decade-old IL&FS is a lending giant based out of Mumbai. It had been powering the country’s public infrastructure expansion, but triggered a crisis in the financial sector in September 2018 when it defaulted on a few payments.

It was soon found that the company had racked up debts of over Rs 90,000 crore. The government has since seized control of the conglomerate, replacing the old board with a new one headed by Uday Kotak, in a bid to end the crisis.

Also read: IL&FS must die for its infrastructure projects to live


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1 Comment Share Your Views


  1. Each infrastructure project should be subjected to a rigorous cost benefit and economic viability analysis. The Kashmir valley cannot be an exception. More than wrongdoing – although that may well have been present – ILFS is in a mess because it is in infrastructure. That sector has also served as an iceberg for the banking system.


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