Ready to face any inquiry into SNC Lavalin deal, says CPI (M)

The Hindu

February 15, 2006

The CPI(M) State secretariat has said the party is ready to face any inquiry into the deal with SNC Lavalin for the renovation of the Pallivasal, Sengulam and Panniar hydroelectric projects.

In a statement here on Tuesday, the CPI(M) secretariat accused the United Democratic Front (UDF) leadership of having falsified facts relating to the Kerala State Electricity Board’s deal with SNC Lavalin and said that if an inquiry was held, the UDF would have more questions to answer than the Left Democratic Front (LDF). While welcoming any type of inquiry, it also sought a comparative analysis of the losses on account of the Kuttiadi augmentation scheme implemented by the UDF Government with the involvement of SNC Lavalin.

The CPI(M) secretariat pointed out that the decision to implement the renovation project was taken by the UDF Government and that the Memorandum of Understanding (MoU) and the subsequent basic agreement with SNC Lavalin was signed when Congress leader G. Karthikeyan was the Power Minister. For the same reason, the UDF should have seen to it that many of the fees and charges paid as part of obtaining the loan was avoided.

Similarly, since a major part of the renovation work was done after the UDF returned to power, it is answerable for the non-compliance with the agreement, poor quality of equipment supplied and the insufficient rise in generation capacity after the renovation work.

The agreement between the Kerala Electricity Board (KSEB) and SNC Lavalin was not a mere consultancy agreement. It included provisions relating to the price of equipment to the method of delivery and it also had specific clauses on the damages to be paid in the event of cancellation of the agreement. The agreement was negotiated and signed under the leadership of C. V. Padmarajan and G. Karthikeyan who were Power Ministers under A.K. Antony.

All that the LDF Government did was to carry out the renovation work on the lines of the Kuttiadi augmentation scheme so as to find an urgent solution for the power crisis that the State experienced at the time. The Government’s effort was to raise the amount promised for the Malabar Cancer Institute and to bring down the overall commitment on account of the UDF’s agreement. It had succeeded in both and brought down the State’s financial commitment by Rs.12 crores.

Referring to the Comptroller and Auditor General’s (CAG) criticism that the consultancy fees should have been avoided, the CPI(M) secretariat pointed out that the consultancy agreement signed in February 1996, remained valid even after the follow-up agreement signed in 1997. Under the 1996 agreement, preparation of detailed engineering design, drawings, construction, supervision and procurement were the responsibilities of SNC Lavalin. The firm also had the responsibility to procure equipment from manufacturers in Canada and supply these. This being the case, the LDF could not avert the Rs. 20.31-crore consultancy fees. This was not communicated to the CAG by the KSEB.

The CPI(M) leadership noted that one major change in the CAG’s observations in the final report has not received the attention it deserved. While in the draft audit paragraphs it had said that the Rs.374.50 crores spent on the project had gone waste, it had changed this in the final report and stated that the amount spent on the project had not resulted in commensurate gains. The CAG’s observation should be seen against the backdrop of Power Minister Aryadan Mohammed’s statement in the last session of the Assembly that the Government had given money to SNC Lavalin only after satisfying that the work had been carried out satisfactorily.

Categories: Asia, India, Odious Debts

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