CAG Report on Vizhinjam Pact: Procedures skipped

 Vizhinjam pact loaded in favour of Adani: CAG Report

"Unfavourable conditions in the concession agreement of the Vizhinjam seaport project have gone against the interests of the State government and to the advantage of Adani Ports and SEZ Private Limited, the Comptroller and Auditor General has said.
According to the latest report on public sector undertakings tabled in the Assembly on Tuesday, the CAG has listed a number of conditions unfavourable to the State. The standard concession period for PPP (public-private participation) projects is 30 years. But it has been fixed as 40 years. This would help the company collect an additional revenue of 29,217 crore.
As per the agreement, the concession period of 40 years can be extended by 20 years on the condition of capacity augmentation. The draft agreement had limited it by10 years. Had the government stuck to the 10-year norm, the State would have got 61,095 crore. Now the benefit would go to the company.
Excess equity support
Owing to the modification of the concession agreement on the premise of improving clarity without any demand from the prospective bidders on December 31, 2014, the government had to pay an excess equity support of 283.08 crore in advance, incurring an interest loss of 123.71 crore.
By affording the concessionaire, the right to mortgage all assets, the government has provided undue benefit to the company.
“The government was mixing and matching clauses as per convenience, all of which resulted in providing additional benefits to the concessionaire,” the report says.
The CAG has also taken note of deviations from the Central Vigilance Commission’s guidelines on pre-qualification criteria.
Tourism dept
The CAG has detected chinks in the Tourism Department’s empanelment of agencies for promotion and marketing of tourism. The process was beset with non-compliance to CVC guidelines and stores purchase manual of the State government. The CAG has detected amendments to tender conditions post-tender in violation of the CVC guidelines. Post-tender amendments coupled with absence of proper evaluation criteria led to selection of a singe agency for a major chunk of marketing activities of the department."

A link to a report on the subject in the Hindu with my comments posted at this Blog on February 24, 2015 copied below:

Vizhinjam: State to woo 3 companies - The Hindu


What is intriguing is why this move to clarify issues for the benefit of prospective participants in a project of this size(involving an investment of over Rs 4000 crore), did not get initiated during the earlier extended period.
Now, the time for submission of tenders has been extended by three more weeks. The other options reportedly considered by the Project Board were, (a) negotiate with all the five companies which had qualified in the preliminary round and make changes in the conditions and (b) go for re-tendering after making material changes in the conditions. In the present scenario, it is to be seen whether hurrying with lobbying to somehow manage one company, or a couple of companies, to submit tender/s in the right spirit even by CM’s well-wishers within his own party.
A Rs 4089 crore project should have received better professional treatment in its conception, project formulation and procedures followed for implementation of the project. This is the fourth time the tender process has failed.
Ideally, as more than ten years have passed after conceiving the project, the project authorities should have opted to withhold tendering by another 3 to 6 months and sorted out hurdles including National Green tribunal issues and the case pending before the Supreme Court. A global re-tendering after sorting out major impediments would attract competition resulting in better and cost-effective implementation of the project.

G WarrierThiruvananthapuram 


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