Canada

KSEB-Lavalin deal draws CAG’s criticism

P. Venugopal
The Hindu
July 10, 2005

The Comptroller and Auditor General of India (CAG) has found that the “entire expenditure of Rs.374.50 crores” incurred by the Kerala State Electricity Board (KSEB) for the renovation and modernisation (R&M) of the hydel schemes at Pallivasal, Sengulam and Panniar between 1997 and 2001 “was rendered wasteful.”

The CAG makes this observation in a report sent to the KSEB on June 22 detailing the findings of the performance audit on the R&M project conducted during the period from January to May this year. A copy of this report is also with the Vigilance Department currently investigating the irregularities/corruption allegedly involved in this multi-crore deal executed between the KSEB and the Canadian company SNC Lavalin during the tenure of the previous Government.

The audit review committee of the CAG is meeting here on July 14. The KSEB authorities have been asked to attend the meeting with their clarifications, if any, on the points raised by the CAG in the report.

The R&M project, executed at a cost of Rs.374.50 crores, did not result in any improvement in power generation at Pallivasal, Sengulam and Panniar, which had a combined generation capacity of 115.5 MW. On the contrary, because of various technical defects in the renovated equipment, the power stations at these three places did not achieve the pre-renovation generation levels when the R&M was completed in 2001.

The SNC Lavalin had agreed to provide the State Government a grant of Rs.98.30 crores for the Malabar Cancer Centre at Thalasserry as a precondition for being awarded the contract to execute the project with Canadian financial assistance. “The Government did not receive Rs.89.32 crores out of this [promised] grant,” the CAG notes.

The report says “there was serious deviation from prescribed procedures in the award of contract to SNC Lavalin.”

The R&M project was undertaken disregarding the opinion of the Central Electricity Authority that there was no need to replace the generators at the three stations.

Global tenders were not invited prior to the signing of the contract for consultancy. “The ministerial delegation which conducted (October 1996) deliberations on the contract with SNC and funding arrangements [with Canadian agencies] in Canada did not even consider the fact that SNC was only a consultant middleman and not the original equipment manufacturer. The contract was finally signed (February 1997) with undue haste without ascertaining the reasonableness of the price,” the CAG says.

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