CAG says state govt extended undue benefit to company

The Comptroller and Auditor General of India (CAG) pointed out that the state government had passed on an “'undue benefit” of Rs 52.52 crore to KSPL due to “short collection” of the government’s share of operational income and lease charges.

The state government had developed the Kakinada deep water port at a cost of Rs 293 crore and entrusted its operation to KSPL in 1999 on a build, operate, maintain, share and transfer basis for an initial period of 20 years.

According to the agreement signed by the state government and KSPL, CAG stated, the company had to share a certain percentage of the operational income with the government or pay the minimum guarantee share amount (MGA), whichever is higher. Accordingly, the government collected Rs 27 crore towards MGA for the years 1999-2000 and 2000-01.

Subsequently, the CAG report stated, the company paid only Rs 26.6 crore for the next three years from 2001-02 to 2003-04 as against MGA of Rs 60 crore, a shortage of Rs 33.4 crore. In 2003, the MGA stipulated in the agreement was revised, which resulted in further short collection of Rs 15.60 crore for the years 2004-05 to 2006-07.

“This only vitiated the sanctity of the tendering procedures resulting in undue benefit of Rs 49 crore (Rs 33.4 crore plus Rs 15.6 crore) to the company for the period 2001-07,” CAG observed.

This apart, CAG said, the lease rentals collected by the government were “far below” the rate payable for different pieces of land given on lease to the company. This has resulted in an undue benefit of Rs 3.52 crore to KSPL.

Thus, the total “undue benefit passed on to the company” amounted to Rs 52.52 crore (Rs 49 crore plus Rs 3.52 crore).