From above it appears that you have not been able to start your project and delay is fully attributable to SAIL or other contractors. Assuming this, what u should ask SAIL is not for Delivery Period Extension for Refixation of Delivery Period.
Now assuming that you too are responsible for dealy, then
1. It means that SAIL will have the legitimate right to impose liquidated damages on you.
2.It will have financial implications nothing else.
3.Rate at which Liquidated Damages will be imposed must be mentioned in your Contract. If it is not mentioned SAIL can not impose it. But it must be there. Its a standard term.
4. No there appears to be no hidden intensions. SAIL is following standard practise.
5.If u do not provide above undertaking, SAIL may refuse to extend the delivery period and cancel your contract. In that case, SAIL may forfeit the Security Deposit you have submitted to them, if any. Further, it can also black list/debar your firm from future contract. Further, if you have agreed to Risk Purchase Agreement Cluse with SAIL then SAIL can exercise that right too.
Professionally, I advise you to provide that undertaking and get the actual Delivery Period Extended to the Date by which you will be able to fully execute the contract.