THIRUVANANTHAPURAM: The Comptroller and Auditor General (CAG) has rapped the State Government for deficiencies in executing theThiruvananthapuram City Road Improvement Project (CRIP) and the circumstances under which the government had to pay Rs 125 crore to the Thiruvananthapuram Road Development Company Ltd (TRDCL) as compensation.
The CAG Report for the year ended March 2011 has also picked loopholes in the original agreement executed between the Kerala Road Fund Board (KRFB) and TRDCL for undertaking CRIP as a PPP project under the BOT scheme.
CAG identified KRFB’s failure to provide encumbrance-free land to TRDCL - a condition in the agreement - as the basis for the whole fiasco. Besides, the KRFB also included an arbitration clause in the agreement, despite a Government Order of 1985 stating that incorporation of the arbitration clause could seriously jeopardise the government’s interests ‘owing to risk of misuse and consequent loss to the government.’
The CAG also noted that the government had incurred the arbitration liability of Rs 125 crore while the total estimated cost was Rs 140 crore for the project!
On Friday, Principal Accountant General (Civil and Commercial Audit), Kerala, G N Sunder Rajan said here that proper records of the project were not maintained.
It was in March, 2004, that KRFB awarded the Rs 140 crore work to TRDCL. As per the agreement, the payment was to be made to TRDCL as six-monthly annuities of Rs 17.75 crore for 15 years starting from November 16, 2006. The work included widening 12 road corridors of a total length of 42 kms, strengthening of road surfaces, improvement of junctions and construction of flyovers. The project was to be completed by November 2006.
For seven years, the work lay incomplete with KRFB failing to provide the land between April 15, 2004, and December 30, 2004.
“Smooth execution was critically dependent on a free site. Given a tight schedule of 30 months for execution of the project, the problems relating to an encumbrance-free site such as litigations, procedural formalities and disputes should have been sorted out before award of the work,” the CAG noted. The KRFB action was also in violation of the procedures laid down in the KRFB manual, according to the report.
In November 2006, TRDCL stopped work and demanded a compensation of Rs 120 crore citing cost escalation and other issues. KITCO assessed the compensation to be Rs 21 crore, and before the arbitration tribunal TRDCL demanded Rs 267.01 crore.
Later, KRFB agreed to a non-speaking award (an award made without giving reasons) and a compensation of Rs 125 crore was awarded in favour of TRDCL.
Although in September 2011, the State Government argued that it accepted the non-speaking award mainly to reduce the prolonged process involved in arbitration, it was silent about deficiencies in the original agreement. “The argument of the government is not acceptable as the decision of the government was in violation of the original agreement and was clearly a favour to TRDCL,” the CAG noted.