CAG finds large-scale irregularities in AP irrigation projects

Report refers to irrigation projects at multiple levels when YS Rajasekhara Reddy was the chief minister of the state

The Comptroller and Auditor General of India (CAG) has cited large-scale irregularities in the implementation of irrigation projects at multiple levels when YS Rajasekhara Reddy was the chief minister of Andhra Pradesh.

 

In a report pertaining to the Rs 1.83 lakh crore Jala Yagnyam  (Water Mission) featuring 86 projects, basing on the performance audit of select projects being implemented between 2004 and 2012, the statutory auditor presented facts that explain as to how an enormous scope for the loot of public money was evolved by the authorities in the name of creating irrigation potential for over 10 million acres of farm land.

 

As on March, 2013, around Rs 80,000 crore has been spent on these projects after the YSR government had  announced a massive irrigation development programme in 2004 -- an unprecedented volume of investments made by any contemporary state government in 8-9-year period. 

 

Jala Yagnam targets missed

 

However, from 2004-05 to March, 2013, only 22 per cent of the Jala Yagnyam targets, in terms of creating new ayacut and stabilisation of the old ayacut was achieved, according to a recent report prepared by the standing committee on irrigation sector appointed by the Assembly speaker.

 

The report cited irregularities including lack of transparency in awarding the contracts, violation of rules, fixing different costs to the works of similar nature and adding certain taxes to the project cost where they were not supposed to. It quoted instances where crores of rupees in excess of the estimated contract value was allowed to be pocketed by the contractor by introducing typing errors.  

 

The YSR government had adopted the EPC (engineering, procurement and construction) system for the time-bound execution of  these projects while creating two categories of work packages, one with the contract value of over Rs 100 crore and the second of Rs 50-100 crore. It had empanelled 19 firms under category-1 and 65 firms under category-2.

 

Contract specifications diluted 

 

The report said criteria for empanellment of the firms were altered later by diluting the eligibility parameters. However, for some strange reasons, most of the contracts were awarded to firms under the open category (other than these two categories), though some of the empanelled firms in first two categories had again got contracts under this third category. 

 

"Out of 649 packages worth Rs 1,23,636 crore, only 227 packages (37 per cent) valuing Rs 23,771 crore (19.27 per cent) were entrusted to the empanelled firms while the remaining 422 packages worth Rs 99,866 crore were awarded to firms under the open category," the report said.  

 

The empanelled joint venture firms changed their partners several times during 2004-12 to form new JVs to bag works in the open category. In one instance of Pranahita-Chevella project, four AP-based firms, namely Megha Engineering and Infrastructure Limited (MEIL), Maytas Infra, promoted by Satyam founder Ramalinga Raju, SEW Infrastructure Limited and NCC Limited, were involved in 15 contracts worth Rs 21,843 crore by forming joint ventures (JVs) in 15 different combinations.

 

The report put out a list of eight companies that were involved in work packages, whose total contract value was  upwards of Rs 10,000 crore. Referring to the list, CAG said despite a specific request for the details of incorporation of JVs and the extent of individual firms' interest in each of these contracts, the department did not share them. 

 

In the list, MEIL, SEW and Maytas occupied the top three positions, respectively in terms of value of contracts in which each of these firms were involved at Rs 36,916 crore, Rs 25,369 crore and Rs 23,186 crore respectively. MEIL, which stood top among the three firms, was not in the original empanelled list alongside the likes of AAG and ABB but, teamed up with partners of various empanelled firms to obtain contracts under the open category, the report stated. 

 

 

Project estimates raised 

 

In one of the findings, the report said there was no uniformity in preparation of the estimates for various projects, while the internal bench mark (IBM) estimates were worked out at increased amounts on five fronts namely higher estimation of quantities, higher estimation of costs of components, inclusion of duties and taxes which do not cover irrigation projects, inclusion of unauthorised amounts towards price variations and inclusion of higher amounts towards insurance. The total impact of these components in increasing the IBM values in the test checked cases was Rs 3,129.51 crore.

 

This was in addition to the abnormal increase in project cost at a later date (Dummugudem project cost was increased by Rs 10,000 crore), overestimation of quantities and quantum of work among other things, according to the report.