Odisha refutes CAG charge on MoUs

Says pacts were not legally binding and were meant to shore up investors’ confidence

After getting reprimanded by the Comptroller and Auditor General (CAG) of India for signing 89 MoUs (memorandum of understanding) with steel and power companies in the absence of any proper policy, the state government has replied that it has not done anything wrong since the MoUs were not legal instruments and had been inked just to shore up investors’ confidence.

In a reply to the CAG, the state government said, since MoUs are not legally binding documents, there was nothing wrong in signing the agreements with the companies without selecting them through competitive bidding route.

“The MoUs signed by the state government with different promoters for setting up of steel plants/pellet plants are to provide comfort to the investors. MoU is not a legally binding instrument,” said the state steel and mines department in its reply recently.

The state government has so far signed 89 MoUs for establishment of steel, power and cement plants in the state. Currently only three MoUs are valid. Out of the MoUs whose validity period has expired, while renewal of 45 are under consideration of the government, 26 companies have not applied for renewal.

CAG pointed out that while MoUs were signed with some promoters, there were many other projects in state where no MoU was signed. These included the ones being put up by Utkal Aluminium International Ltd, Mid-East Integrated Steel, Saraf Agencies Ltd and Dinabandhu Steel & Power Ltd, which have been provided with land and other facilities.

The state government said, land acquisition proceedings were not entirely guided by provisions of MoU. The land acquisition is processed under the land acquisition act without any discrimination between MoU and non-MoU projects as they are guided by the recommendation of high level project clearance committee headed by the Chief Minister.

“Hence there is no question of loss of sanctity of MoU, more so for that fact that MoUs signed are to provide comforts to the investors,” it said.

The CAG had last month slammed the Odisha government for entering into MoUs with industrial houses without any policy or guidelines for assessing the need for industries noting that pre-requisites for signing of MoUs with promoter companies was not prescribed. Besides, monitoring mechanism on implementation of various commitments by both the state government and private promoters made in these MoUs was also not prescribed, it pointed out.

The public account watch dog had faulted the state government for not choosing project proponents through competitive bidding.

“Neither any competitive bidding was made for selection of parties for setting up of any particular type of industries/infrastructure projects, nor any Request for Proposal (RFP) was issued,” it said.